The HST has been defeated and will revert back to old system by April/May 2013. How will the change affect you and real estate in BC?
We don’t yet have all the information that we will to understand all the specifics of when the current tax will be applied versus individual PST and GST. For example, when the HST was announced and still incoming, it counted towards services in the sale of a property (ie commissions) dependant more on when services were rendered rather than upon closing when the money was due. That is, if 90% of work was done before July 1, yet a purchase closed after that date, only 10% of the service was subject to the full 12% HST. Working the other way in 18 months, don’t necessarily assume that a closing date after the tax changeover date will automatically save you that extra 7% PST portion.
There is still confusion amongst the public as to where HST actually gets applied in the sale of real estate. When it comes to resale properties, you pay GST/HST on services only (eg commissions, fees, lawyers, inspectors, etc). But the building of a new home is considered a service in its own right, so if you are buying brand new, you pay 12% on top of the purchase price (less a prescribed rebate, as explained here). So you can guess that knowing there is a tax savings to be had in a year and a half, potential buyers of new homes will be holding off on their purchases. Not good news for developers. The same can be said for contractors who will probably see people delaying home renovations until they can save that extra 7%.
Speaking of that HST rebate above, there used to be a GST rebate, but there are no details yet as to whether a new GST rebate will be re-introduced (probably), or what it might look like. The percentages and caps may be different, so the savings versus the current system of tax and rebates might not be all that big. After all, the defeat of the HST leaves a dearth of revenue and a $1.6bil IOU to the feds that will have to be addressed somehow.
Are you debating selling your current home but thinking you’ll now wait to save some money until after the tax change? Consider this: the benchmark house price in Vancouver is $899K. PST portion of taxes on commission to sell this: a little under $1900, or 0.2% of the sale price. But there is no guarantee of house prices not falling below the current benchmark, especially with an expected jump in interest rates well before 2013. So while you may save 1/5 of a percentage in taxes, you might lose much bigger on your overall takeaway. (Or maybe not; whoever knows!)