Up until a couple of months ago there was frenzied activity in the Toronto and Mississauga Real Estate market.
Listings of homes for sale were few and multiple offer situations were the normal order of the day.
How quickly things change!
The Toronto Real Estate Board recently reported a 34% drop in sales for the month of July, the third straight month of declines.
What has changed?
New Federal Government mortgage rules came into effect April 19 of this year making it harder for some people to qualify for a mortgage. This would have locked some people out of the market for sure.
Is that a bad thing?
In my opinion no, some of those people could have taken on too much debt and find themselves in trouble eventually. Enough of them defaulting in the future would spell trouble for all of us, the kind of trouble our neighbours to the South of us have been experiencing over the last few years.
The biggest culprit responsible for the huge drop in sales is the new Harmonized Sales Tax introduced by the Provincial Government of Ontario and becoming effective July 1st of this year. This tax blended the 5% Federal Goods and Services Tax with the 8% Provincial Sales Tax.
However where some goods and services were previously exempt from the Provincial Sales Tax, they now became taxable.
The following services on a real estate transaction now become subject to an additional 8% in new Harmonized Sales Taxes:
•· Home inspections
•· Mortgage Appraisals
•· Mortgage Insurance Premiums
•· Title Insurance
•· Lawyers' Fees
•· Real Estate Agents Fees
That pushed up the cost of buying a home for everyone wanting to do so, but it was particularly hard on first time buyers.
The Ontario Real Estate Association estimated the additional tax on a transaction of $326,800 will be in excess of $1500.00.
When you increase the cost of something and give nothing tangible in return the result will be a drop in demand.
There does seem to be some confusion however in the minds of the public as to whether there is any H.S.T. payable on the price of a resale home.
We in the industry need to clarify this question.
There is NO H.S.T payable on the price of a resale home, only the services involved in the transaction.
The lead up to implementation of the new H.S.T. was in part responsible for the frenzied activity in the first five months of the year but once home buyers get used to the new tax the market should get back on its feet and be more balanced.
That's how it looks from my point of view.
What do you think?
John Lavin is a full time realtor with 25 years experience helping buyers and sellers of homes, condominiums and investment properties in Toronto and Mississauga. If you are in the market for Toronto or Mississauga Real Estate please visit www.john-lavin.com
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