Ontario HST tax

[mike81]

hey guys,

Just wondering how the new tax system will effect real estate come July? Will it be mainly new homes that get the brunt of this? Of course some closing costs will also get impacted but not to the same degree...So will it be business as usual or are you going to try and speed things up a bit?

 

[clearyarchitect]

While I do not have any concrete words of wisdom on the topic, one observation that effects the larger scale of the housing picture is that you are likely to see the new housing market saturated with spec homes in the coming months. Builders are aware...very aware...of the tax and its implications. I am not sure what the effect on rental rates or existing home prices will be...but some slightly abnormal activity will be going on in that there will be a larger than average supply of new homes waiting to be sold. Will this eat up future housing demand along with the threats of interest rates to rise and cause a mini pricing bubble we should try to stay out of? My guess is as good as yours.

 

[clearyarchitect]

I will add however, there is speculation that a lot of reno work will move to cash jobs in a move to avoid the tax. This means smaller contractors grabbing up more experienced jobs in what might be investors attempt to save tax dollars. obviously any contractor in this group will tell you to be weary of this, as a word to anyone looking to do large reno`s.

 

[Thomas Beyer]

QUOTE (mike81 @ Jan 28 2010, 12:37 PM) hey guys,

Just wondering how the new tax system will effect real estate come July? Will it be mainly new homes that get the brunt of this? Of course some closing costs will also get impacted but not to the same degree...So will it be business as usual or are you going to try and speed things up a bit?
house prices will DROP after July since new homes plus HST will be the same as same new house without HST before July 1 .. thus of course also affecting old homes as old and used homes go up and down in tandem .. so expect a moderation of prices in 3Q and 4Q 2010 .. possibly even lower than 2Q if interest rates go up as well as expected !!

 

[housingrental]

Hi Thomas

This seems somewhat muddled ?
Why would it decrease the value of resale homes?
It has no pricing impact on resale homes
On a relative basis to new construction they become cheaper

This will lower sale price of newer homes, reduce sales of newer homes, and increase total cost of new home purchase.


QUOTE (ThomasBeyer @ Jan 28 2010, 09:19 PM) house prices will DROP after July since new homes plus HST will be the same as same new house without HST before July 1 .. thus of course also affecting old homes as old and used homes go up and down in tandem .. so expect a moderation of prices in 3Q and 4Q 2010 .. possibly even lower than 2Q if interest rates go up as well as expected !!

 

[Thomas Beyer]

QUOTE (housingrental @ Jan 30 2010, 11:16 AM) Why would it decrease the value of resale homes?
because new and old home prices are related !

There will be a run-up in new home prices (and thus, old ones) until June 30, 2010 in BC and Ontario. Then, HST will add 7% to new homes and poof, new homes will drop about 6-7% so that price including HST will be the same in July as in June .. more or less. This does affect older homes !

Plus: mortgage rates are expected to rise in latter half of 2010 .. thus further "hurry .. buy now .. lock in your mortgage" talk on the radio, in newspapers and by realtors !

If new homes go up or down 10% .. so do used / old homes !

Don`t get caught in the frenzy in 2Q 2010 !!

 

[billkeay]

Dear REIN members,

HST will increase closing costs because all services related to a transaction will be taxed: appraisal fees, Realtor fees, CMHC fees, home inspection fees, Lawyer fees etc...

New construction will be taxed as well but there are exemptions or rebates up to $400,000.

Also, if the homes need renovations these services will be taxed as well. If a client is buying or selling a home that needs a lot of renovations these added costs arising from the HST will need to be factored into their decision making process.

I believe that Realtors are trying to make their clients aware that their costs to buy and sell real estate will be changing on July 1st, 2010. This is not just hype to get people to buy and sell before July 2010. Buyer and Seller beware that`s all.

Regards,

Bill Keay

 

[luckyluciano]

Real Estate prices are established by supply and demand. Assuming prices will decline because of increased costs is purely speculative. Think about the doubling of land tranfer tax in Toronto.....prices still continue to increase. The provincial component of HST is 8% however prices on homes under $400K should only increase by 2% since there is a 6% rebate to the builder on these homes.