« Real estate market in recovery mode | Main | Global Real Estate Trends »

Don't be surprised ...

Thinking of selling your home? -- well there's always next year.

But wait .. next year may be too late. The new 13% harmonized sales tax comes into effect in Ontario on July 1, 2010, and it will likely hit the whole housing market hard. If you haven't sold by July 1, you may well be out of luck. And if you haven't bought by then, well, maybe you'll want to change your mind. And the funny thing is, hardly anyone seems to realize it.

"There are going to be a lot of very surprised people on July 1," says Jim Flood, director of government relations for the Ontario Real Estate Association. "It's a massive tax increase."

So here's the bad news: Although resale houses will not be taxed, everything to do with the sale will be -- the house inspection, the agent's commission, the moving costs and legal fees.

There will even be tax on the home energy audit all sellers are now compelled to carry out thanks to the Green Energy Act the McGuinty government passed in May. And speaking of the home energy audit, why isn't anyone concerned about that?

Altogether, that means the extra tax on a resale house priced at $369,000 will come in at roughly $2,000 (largely the tax on the agent's commission) and double that and more on many ordinary houses in Toronto, before you even remember you have to pay Toronto's onerous land-transfer tax, too.

It's enough to make you wonder exactly why you're thinking of moving. Or to get you packing your bags and calling the mover today.

But it's worse news for new home buyers, although not as bad as it was originally expected to be. Under pressure from groups like the Ontario Home Builders Association, the province has decided not to levy the tax on the first $400,000 of any new home purchase. (GST has been payable for a number of years but builders tend to hide it in the house price.)

So on a $500,000 house, the extra HST hit will be $6,000 instead of $30,000 (builders get a 2% tax credit that lowers the overall tax hit from 8% to 6%). Without that change, the loss of a potential 21,200 jobs in the GTA alone looked probable. That's enough to scare off first-time home buyers and potentially many other people struggling to make ends meet.

Easy, according to the OREA's Flood: "There's a lot of ignorance. I don't think the average consumer is even aware of the tax." The HST will impact many things you haven't even thought of yet -- but the housing-related taxes are killers.

How new tax adds to cost of a sale:

(Estimates based on house less than $400,000, from Ontario Real Estate Association)

September 29, 2009 in Toronto Real Estate Taxes | Permalink

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c51e453ef0120a5a91e3a970b

Listed below are links to weblogs that reference Don't be surprised ...:

Comments

Great Post! I find your blog very helpful for real estate and I am sure others do as well. Keep up the good work!

Posted by: North Bay Village Homes | Jun 26, 2010 3:50:47 AM

Building your dream house is one of a big success for yourself, so why are we sell our home?

Deirdre Gonzales

Posted by: homes for sale philippines | Oct 13, 2009 9:13:50 PM

MLS does play a large portion, it gets your house more exposure that it would if you advertised elsewhere. However, if you don't have a real estate agent, you better have a really good lawyer. Any purchase contract should be reviewed by lawyer first. Also, will you know if the buyers are financially qualified to purchase your home? And do you even know how much your house is worth in the first place? If you set the price too high, no one will want to buy. If you set it too low, you cheat yourself. Just a few things to consider.

Posted by: Jhony | Oct 6, 2009 2:23:54 AM

Very informative post... I hope that the Albertan government does not ever implement HST because that would really affect the Calgary real estate market.

Good to hear Chris about you purchasing in Alberta, Calgary is especially a great city to live in.

Posted by: Miranda Moser | Sep 30, 2009 12:43:30 PM

Great post. The changes to HST in BC are causing similar, if not larger problems. I've been surprised that there hasn't been a larger outcry in Ontario.

Yet another reason I'm glad I'm buying in Alberta.

Posted by: Chris Davies | Sep 30, 2009 4:34:25 AM

The comments to this entry are closed.

 

Thank you for visiting!