Hst Tax Affect On Home Sellers In British Columbia

The new harmonized sales tax (HST) taking effect within British Columbia in July of this year will severely tax an already high-priced real estate market. The tax itself is a combination of provincial sales tax (PST), set at 7% and the federal goods and services tax (GST), which is set at 5%. This creates an extremely high 12% tax that will be added to goods and services that were previously exempt from the PST, including restaurant tabs, haircuts, and clothing as well as the larger priced ventures like real estate.

This new tax is being sold as a boon to the economy with no impact for buyers of homes under $400,000. Realistically, the median home price is well above $400,000 in many parts of British Columbia which boasts one of the highest real estate markets. The impact on sellers is clear - there will not be as many buyers able to afford the 7% increase in taxes that was once only a 5% GST.

For homes priced under $525,000 there will supposedly be a rebate that will refund 5% of the housing cost to offset the costs to both sellers and buyers. This rebate is only a small buffer for an increased tax across the board.

An example is that for a home selling for $600,000, the HST tax would equal $72,000. Applying the proposed rebate would lessen the tax impact to a total of $52,000. The problem lies in the fact that with the normal GST, the tax on such a home would only equal $30,000 and so buyers are still having to pay an extra $22,000 of taxes they didn't have to previously. This price increase doesn't just stay with the cost of the home, however.

The effect of the HST also goes beyond closing costs and will be added to any fees associated with property purchases including any legal fees and, of course, real estate commissions. Homes will now cost more up front than the asking price when factoring the HST, as well the overall experience of living in that home.

Because HST is applied to a wide variety of goods and services it will be impacting internet, gas, electricity, heating fuel, and any repairs that are made. The HST creates a large jump in living expenses that makes the purchasing of a new home, or even selling an existing home very difficult.

While economists are insisting the viability of the HST in creating a more stable economy within British Columbia, there is no system in place to ensure rebates are passed on to home buyers, putting sellers at a disadvantage since many buyers may become scared.

The housing market is traditionally looked upon as part of the makeup of a healthy financial system, but the HST is in danger of bringing the housing market to a standstill. Applying a tax unilaterally to goods and services, as well as real estate, overall escalates the cost of living and limits spending rendering the HST essentially useless. The new HST tax and how it affects home sellers remains to be seen, but the prognosis seems grim.