Good morning everyone and welcome to 2013! We would like to wish you all a very happy & prosperous new year.
In terms of real estate, I think it is going to be quite an exciting year as there are lots of changes coming up. The biggest, of course, is the cancellation of the HST. Before we go any further, I want to take a minute and clean up one major misconception...
No, houses do not get less expensive when we switch back to the GST only model!
Here is the detailed explanation: Right now, and until March 31, 2013, new houses include GST + 2% (of the 7% of the HST) as long as the house is under $850,000 - this is the HST. Once the HST goes away, the same houses only include GST but the builders cost goes up because the builders cannot write off the 7% PST like they can under the HST. The net result is that all of their building materials cost 7% more after April 1, 2013, than they do now. On most houses, 7% of increased cost in materials ends up increasing the total build cost of the house by just over 2%. I'm sure that you can see where I am going... The net result, is that new houses priced "including net HST" will cost the same after the HST goes away, as before. You will also read about a transition tax of 2%. This is taken into account in my calcuations as well. Do the math, and you will see this for yourself that new houses prices wil not go down after the HST goes away.
Of course, resale houses do not include HST anyway so they do not change in price.
If you have any remaining questions regarding HST, feel free to give us a call and we would be happy to go over the math with you.
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