I hope everyone enjoyed the holiday season. Now it's back to reality. It's kind of nice to get back into a routine not only for myself, but for my kids as well. Now that the holidays are over, we need to focus on this HST tax that is coming this July. Not much is being said about it right now. That can be attributed to the power of the media. They are not really putting much behind this. They will once they realize the true impact.
By the time they get beind it, it will be too late to change. The damage will have been done. 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 bought or sold by July 1, you may well be out of luck. I know my clients really haven't given it much thought. When I bring it up, some can't be bothered because they really don't understand the true impact.
I believe there are going to be a lot of very surprised people on July 1. This is a huge tax increase that is currently below the raadar screen.
It's true that resale houses will not be taxed, however, everything to do with the sale will be -- the house inspection, the mortgage insurance, the agent's commission, the moving costs and the legal fees.
Once you do the math, the extra tax on a resale house priced at $370,000 will come in at about $2,000. Keep in mind that not many homes in a city like Vaughan sell for that type of price . Most sell for substantially more so you would be looking at an even bigger tax grab.
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.
For new home buyers, it's even worse, however, it's 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%).
We should actually be thankful that the government decided to make a change to their proposed tax plan on new homes. If they did not make the change, it would have crippled new home developments across the city. 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.
This new HST will impact many things you haven't even thought of yet -- but the housing-related taxes are killers.
Here's how new HST tax adds to the cost of a sale on a house less than $400,000:
Realtor Commission $1,100- $1,600
Mortgage insurance $475
Legal costs $85
Home Inspection $35
Title Insurance $10
Total $1,705 -$2,205
It all adds up. In a nutshell, if you plan on buying, do it now. If you plan on selling, the spring market will be hot. If you need any further info, give me a call or email me with your questions or concerns.
Joe
At Your Service....Always
