On July 1, 2010 British Columbia will be having to deal with the HST. When reading this you may feel I'm totally against the HST, but I'm not. However there needs to be some more concessions when it comes to Real Estate or there may be some poor consequences. Below I will show how much of a burden the HST will be for those who dare to purchase a New Construction property after July 1st.
One question that comes to mind. If new construction decrease their prices to help off set the extra cost for consumers wouldn't previously owned properties have to follow suit, because really they are both linked together. If previously owned properties then have to be lowered to keep up with new construction, won't all prices drop. Now if all prices drop, isn't the Liberal government, by creating this new tax, basically bringing down the price of homes in BC. Mmmmm...I hope that doesn't happen but who knows...I'm not an economist...mind you they don't know either.
Anyway...here are some number below to chew on. Good luck new construction.
New Construction.
Average price of a home in Chilliwack:
$448,690
Under Current Tax System 5% GST $22,435 - $83 (GST Rebate) = $22,352
Under New HST Tax System 12% HST $53,843 - $83 (GST Rebate) - $20,000 (BC Gov't Rebate) = $33,760
That's an extra cost of $11,408 on your new home purchase.
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Let's bump that price of a home up a bit:
$668,655
Under Current Tax System 5% GST $33,433 - $0 (No GST Rebate over 450K) = $33,433
Under New HST Tax System 12% HST $80,239 - $0 (No GST Rebate over 450K) - $20,000 (BC Gov't Rebate) = $60,239
That's an extra cost of $26,806 on your new home purchase.
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Just for fun, let's bump it up one more time.
$896,792
Under Current Tax System 5% GST $44,840 - $0 (No GST Rebate over 450K) = $44,840
Under New HST Tax System 12% GST $107,615 - $0 (No GST Rebate over 450K) - $20,000 (BC Gov't Rebate) = $87,615
That's an extra cost of $42,775 Wow, I just pooed my pants!!
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Now I know what you are thinking, that's if I buy new construction. Well the HST will affect what you pay for the sale of your old home as well. Every service that goes into selling and buying real estate has to charge, you, the consumer, an extra 7%. On average that extra cost will be $2,000 per home sale.
To put that number in perspective, last year Chilliwack alone sold 2,224 properties, both commercial and residential. If those properties were sold during the HST reign the total in extra tax payed to the government would be:
$4,448,000
That's 4 1/2 Million dollars that will no longer be spent in Chilliwack, on Chilliwack products, in Chilliwack businesses, but rather given to the government.
That number is on Real Estate alone, in Chilliwack alone. Try figuring out every service that will be charging an extra 7% tax, for all of BC. That number would be huge.
Kyle Hislop
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