The question on everyone's mind this year is how the new harmonized sales tax (HST) implemented by Dalton McGuinty will affect your new home purchase. The feeling is quite similar as to when the government implemented the new land transfer tax last year in Toronto. Everyone was rushing to purchase as quickly as they could to avoid the new tax. A similar situation has been created, however introducing this new provincial plan at a time when the economy is recovering does not make things easier for home buyers. For example, to purchase a $500,000 home after July 1st 2010 could end up costing you an additional $40,000 dollars. Other items that you will notice that will increase in price are newspapers, internet services, airplane fares, and construction costs to name a few. When construction costs increase, so will the price of new homes and condos in the Durham Region and GTA. As of now there are only two options in order to avoid this tax, if you are purchasing new construction home. They are as follows:
- Purchase a new condo or new home under $400,000 (after July 1st 2010) as units at this price range are exempted from the tax.
- Purchase a new condo or new home before July 1st, 2010 in order to avoid the tax.
Another way to avoid the HST is to purchase a resale home or condo. Even though the purchase price is not directly affected by the new tax, buyers and sellers of resale homes will hurt as the HST would apply to many services that are currently exempt from PST. Such services include legal fees, real estate agent commission, renovation services, land survey reports, home inspections, landscaping and house cleaning services. Also affected would be the cost of labour for installations or repairs, additions, renovations, driveways, roads, fences, swimming pools and patios.(OREA estimates the HST will add $1,449 in new taxes to an average resale home costing $302,354)
We are currently seeing dramatic increases in sales and prices in real estate in the Durham Region and GTA with first time homebuyers eager to enter the market and take advantage of low interest rates and pre-HST price hikes.
For more detailed information about the HST, go to Ontario Ministry of Revenue's website http://www.rev.gov.on.ca/en/taxchange/