Toronto Star Column (as it appears each Friday in the Toronto Star)
HST will not affect resale homes
July 9, 2010 -- As of July 1st, the new Harmonized Sales Tax (HST) will be in effect and Ontario consumers will be hard-pressed to avoid this so called “tax on everything”. While that less than flattering nick name for the HST may be pretty close to the truth, it’s not completely accurate, especially when it comes to real estate, where the HST applies differently depending on the type of real estate, whether it is resale housing, newly constructed housing, or business properties.
Anyone who has ever purchased a home or has considered purchasing a home knows that budgeting for taxes is an important part of determining what they can afford. Whether it is the on-going cost of property taxes, or the upfront cost of land transfer taxes, the cost of taxes on housing can add up.
With that in mind, one of the most important things to know about the HST is that, fortunately, it will not increase the tax burden on the purchase price for homebuyers who purchase resale housing. That’s because resale housing, which was never subject to Provincial Sales Tax (PST) or the federal Goods and Services Tax, will continue to be exempt from both taxes once they are combined under the HST.
The same is not true for newly constructed homes, which will be hit with additional tax under the HST. Newly constructed housing has always been subject to the GST, meaning thousands of dollars of tax for home buyers choosing this option. Now, with the HST, new housing will also be subject to PST, meaning thousands of dollars in added costs for home buyers of new housing.
There is a silver lining for new housing: the provincial government provides a rebate of 75 per cent of the PST on the first $400,000 of a newly constructed home, or a maximum of $24,000. For example, someone purchasing a new home priced at $500,000 would face $40,000 in additional tax from the provincial portion of the HST, which would be reduced to $16,000 with the rebate. Obviously, the rebate softens the blow, but an extra $16,000 of tax for a newly constructed home is nothing to laugh at.
Fortunately, home buyers choosing to purchase a resale home don’t have to worry about paying HST on the price of their home. That’s money that they can keep in their pocket, or use to keep their mortgage costs down.
There is also encouraging news when it comes to real estate for businesses. Although the costs of purchasing or renting a commercial property are subject to HST, businesses are allowed to claim tax credits to offset these costs. Even better, when purchasing a commercial property, the business can claim the tax credits immediately so that no upfront costs are incurred for the HST, and cash flow is not impacted.
It won’t be long before the HST is a reality in Ontario and taxes on a long list of goods and services will increase. Although it would be nice if HST didn’t apply to any real estate transactions, luckily, there is some encouraging news, especially for homebuyers of resale housing, who won’t see the purchase price of their home increase due to HST, and businesses buying or renting commercial properties, who will be able to offset their HST costs.
Thursday, July 15, 2010
Saturday, July 10, 2010
Market Watch Report
Market More Balanced in June
July 6, 2010 -- Greater Toronto REALTORS® reported 8,442 sales through the Multiple Listing Service® (MLS®) in June. This represented a 23 per cent decrease compared to the record 10,955 sales reported in June 2009. Sales for the second quarter of 2010 amounted to 28,810 – up one per cent annually. Year-to-date sales through June were up 23 per cent to 50,455 compared to the first six months of 2009.
"We experienced a record number of existing home sales during the first half of 2010, but these sales were weighted more towards the beginning of the year," said Toronto Real Estate Board President Bill Johnston. "The pace of home sales has moderated from record levels over the past two months with the prospect of higher mortgage rates."
The average price for June transactions was $435,034 – up eight per cent compared to the average of $403,972 recorded for June 2009.
"With more homes to choose from in the second quarter, many home buyers have been making less-aggressive offers. This has resulted in less upward pressure on the average selling price," said Jason Mercer, TREB's Senior Manager of Market Analysis. "The annual rate of average price growth in the second half of 2010 will be in the single digits."
Jonathan's Opinion
Jonathan’s Opinion
As expected, the real estate market has begun to cool off at a healthy pace. The reason sales have decreased in June is simply because of the law of supply and demand.
When interest rates were at a historical low the amount of buyers was much higher than the amount of sellers, thus leading to quick sales and higher prices.
As interest rates increase we notice that the amount of buyers and sellers are beginning to reach equilibrium. What will happen is that buyers will begin having more selection, and no longer have to overpay, or compete for a house.
This will lead to sellers not selling their homes as quickly anymore, and may also, in the future, lead to a slight correction in prices.
I say in the future because in order for a price correction to occur, interest rates must be much higher than they currently are, and although they are going up, they are still low enough to be attractive to buyers.
It is not necessarily a “Buyer’s Market” just yet, but it will get there.
Remember, this is a good thing, as it restores normality and balance in the real estate market, which is what is needed!
July 6, 2010 -- Greater Toronto REALTORS® reported 8,442 sales through the Multiple Listing Service® (MLS®) in June. This represented a 23 per cent decrease compared to the record 10,955 sales reported in June 2009. Sales for the second quarter of 2010 amounted to 28,810 – up one per cent annually. Year-to-date sales through June were up 23 per cent to 50,455 compared to the first six months of 2009.
"We experienced a record number of existing home sales during the first half of 2010, but these sales were weighted more towards the beginning of the year," said Toronto Real Estate Board President Bill Johnston. "The pace of home sales has moderated from record levels over the past two months with the prospect of higher mortgage rates."
The average price for June transactions was $435,034 – up eight per cent compared to the average of $403,972 recorded for June 2009.
"With more homes to choose from in the second quarter, many home buyers have been making less-aggressive offers. This has resulted in less upward pressure on the average selling price," said Jason Mercer, TREB's Senior Manager of Market Analysis. "The annual rate of average price growth in the second half of 2010 will be in the single digits."
Jonathan's Opinion
Jonathan’s Opinion
As expected, the real estate market has begun to cool off at a healthy pace. The reason sales have decreased in June is simply because of the law of supply and demand.
When interest rates were at a historical low the amount of buyers was much higher than the amount of sellers, thus leading to quick sales and higher prices.
As interest rates increase we notice that the amount of buyers and sellers are beginning to reach equilibrium. What will happen is that buyers will begin having more selection, and no longer have to overpay, or compete for a house.
This will lead to sellers not selling their homes as quickly anymore, and may also, in the future, lead to a slight correction in prices.
I say in the future because in order for a price correction to occur, interest rates must be much higher than they currently are, and although they are going up, they are still low enough to be attractive to buyers.
It is not necessarily a “Buyer’s Market” just yet, but it will get there.
Remember, this is a good thing, as it restores normality and balance in the real estate market, which is what is needed!
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