The positive and negative reactions of local and provincial home builders and developers in regards to the new Harmonized Sales Tax in British Columbia. Many homebuilders are afraid that the introduction of the 12% HST tax will negatively affect the BC real estate markets, especially the pre-sale and pre-construction property markets within Greater Vancouver, where most new homes cost more than $400,000. We will be updating this article as more reaction comes in from various developers who are either opposed or supportive of the new BC Harmonized Sales Tax.

Implications of the New Harmonized Sales Tax on BC Home Builders and Developers
Simply put, the new BC Harmonized Sales Tax will hike new Vancouver home prices significantly. Because of this, local Home Builders are very worried about the prospect of the July 1st, 2010 implementation of the BC Harmonized Sales Tax of 12% levied against new home buyers for new property and real estate throughout the province. The Harmonized Sales Tax, or BC HST, will be applied to new housing and comes at a time when the property market seems to be rebounding after a significant drop in property values and sales volume during the last 12 monhts. A co-owner of Portrait Homes in Richmond expressed his dismay over the introduction of the combined provincial sales tax and federal goods and services tax into the B.C. Harmonized Sales Tax of 12% and noted that the recent upwards trends in property prices and new home sales will likely stall because of the twelve per cent tax. Many home builders across BC warn that the new tax will turn off new homebuyers from making their purchase, as the increase in final purchase costs can be quite significant. Currently, new homes are subject to 5% GST but with the new B.C. Harmonized Sales Tax on Vancouver and BC new housing, it goes up to 12% HST. This is a difference of 7% which is also applied to commissions, fees, and other costs associated with buying and selling property. The new BC HST will offer a 5% or five per cent HST rebate of the provincial portion of the single tax, but only up to a maximum of $20,000 BC HST rebate. Because of this, any new Vancouver home or BC real estate purchased after July 1st, 2010 will bear no extra taxes than the current GST only system. Homebuyers looking to buy new Vancouver property over $400,000 will receive a maximum BC HST rebate of $20k, but will see the purchase price above that level subject to the extra five per cent tax rate system. As mentioned above, the B.C. Harmonized Sales Tax will also apply to other real estate associated costs including legal fees, notary public fees, commissions etc.

How Does the BC HST 12% Tax Work on Real Estate?
BC and Vancouver home builders are seeking reassurance from the provincial and federal governments that the introduction of the new harmonized sales tax or HST will not impact new home buyers in the province. The combination of B.C.’s 7 per cent provincial sales tax with the 5 per cent federal GST will increase the cost of purchasing a new home throughout British Columbia. Last week in August 2009, the Greater Vancouver Home Builders Association and the Canadian Home Builders Asssociation-B.C. met with the BC government officials to discuss how the new 12% BC HST Harmonized Sales Tax will be levied on new home sales. Coming effect in July 1st, 2010, new Vancouver and BC home buyers will get partial rebates if the new homes are less than $400,000 (four hundred thousand dollars). With this HST rebate on new homes under $400k, the government says that the purchase cost of the property will be no more than the current system (ie. 5% GST applied to new homes, and no 7% provincial BC tax applied). However, new BC and Vancouver homes above the $400,000 purchase price will receive a flat rebate of a maximum of $20,000 (twenty thousand dollars). Many home builders are completely shocked that the province has mandated the introduction of the BC HST Harmonized Sales Tax for July 1st, 2010. The government cites that small business owners will be the winners out of all of this in addition to less paperwork on all sides, but when it comes to taxing 12% on BC real estate and new Vancouver homes, it really isn’t a great idea. As one of the more fragile property markets in Canada, being the most expensive and most unaffordable, the BC government has essentially increased the purchase cost of new Vancouver homes and real estate by 7%. In addition, the BC HST 12% Harmonized Sales Tax is also applied to any closing fees and costs related to the property purchase, which again makes it even more expensive to purchase new homes in the most expensive housing market in the country. As Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association notes, homebuyers looking to purchase new B.C. or Vancouver homes at or above $400,000 are the real losers in all of this. The study shows that on a new $600,000, a new home buyer in British Columbia will pay an extra $42,000 (forty two thousand dollars) in taxes because of the new HST 12% Harmonized Sales Tax on real estate. The homebuyer can receive a rebate up to $20,000, so the additional increase in purchase price is $22,000. However, this does not include the Harmonized Sales Tax amount applied to other fees and costs. Resale BC and re-sale Vancouver housing is exempt from the BC HST (as it is already exempt from the current 5% GST).

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