Whistler homebuilders are welcoming the new HST transition rules announced by the province this week.
"I think that one of the most valuable parts of the adjustment, or transition rules, is the extension of the (HST) credit to second homeowners, said Bob Deeks of Whistler's RDC Fine Homes.
"Previously with the lower threshold that credit was not available.
"Even though the credit on vacant land purchases is small, it wasn't available to someone looking to buy or build a home here as a second home. And the increase of the threshold, considering the value of properties, was meaningful."
Deeks said things are picking up and that he could be signing two new home building contracts for next summer — something that may not have happened without the transition rules.
"It's the uncertainty the tax created," he said. "It started with the announcement of the referendum, and then the results of the referendum created another time lag, a chance for people to sit on their hands and wait until 2013. The announcement of the transition rules ended that uncertainty."
Deeks said the new rules are the icing on the cake in a way, as Whistler has never been as attractive to build, buy or renovate.
"If I had a message it would be that now is the time to take advantage of low interest rates and overcapacity in the industry. People are keen to work and providing good pricing," he said. "And real estate in Whistler is at an all-time low... one client bought a lot in Bayshores for $350,000."
Deeks said the recent trend is towards value, even for high-end homes.
"Real estate has become like baseball, where people are obsessed with statistics. Twenty years ago nobody considered the cost per square foot like they do now, and now we see people making those comparisons on paper without looking at any features. They look at the street address, the square footage, the assessed value of the home, and it's become a pure numbers game. Some of the emotion has been taken away from buying real estate."
The addition of HST to new home sales was one of the most contentious issues when the province brought in the HST. It added five per cent tax to every purchase. With the average home price in Vancouver hovering around $800,000 it was a sizable hit.
Prospective homebuyers had no idea what would replace the HST, and if it was better to wait until the tax was removed before buying or building a home. The GST system will come back into force in April 2013.
The main concession by the province in the transition rules was the decision to raise the HST rebate threshold to $850,000 from $525,000, a level that captures roughly 90 per cent of new homes in the province. For an $850,000 home the rebate is $42,500.
As well, it's a progressive tax. If you purchase a home valued over $850,000 you can still get the rebate up to that amount.
In addition to new home sales, there are also rule changes for lot sales, second homes and rental properties that will go into effect.
One development that expects to benefit from the transition rules is Cheakamus Crossing, where 10 market homes at River Bend are still for sale, as well as several private lots. Lowering the threshold makes all of those homes eligible for the full rebate said Rob Palm at Whistler Real Estate Co., which is handling the sale.
"Moving the threshold from a maximum of $26,250 to $42,500 is fantastic, so people buying a principal residence (at River Bend) will be able to get about a $32,000 rebate on their taxes," said Palm.
"But the amazing thing is that for anyone buying a property as a second home the government has basically given us the $32,000 price reduction without having to lift a finger, because people that previously didn't qualify are now able to get a rebate. That's huge for us at Cheakamus Crossing and River Bend especially, and it's also big for any other projects — Fitzsimmons Walk, Rainbow."
Palm said the transition rules also create opportunities in rental housing, or "anything that's considered a commercial property and doing nightly rentals."
Those owners can defer paying HST on the purchase price (although they still pay HST on rentals), or can get the rebate if they decide to take the unit out of the rental pool and make it their primary residence.
Palm said it's hard to say how the HST uncertainty impacted business, but knows some people were sitting on the fence before making buying decisions.
"What this does, if you look at a property on the open market that's listed for the same money, all of a sudden you can come buy at River Bend for five per cent less... which is a pretty good inducement."
The Canadian Home Builders Association — Sea to Sky has endorsed the province's approach, both in terms of new home sales and the expansion of the rebate to second homeowners.
"Second homes ownership is very important to the Whistler market in particular and this should create a stimulus for builders in the area," wrote Eric Prall, present of the CHBA-S2S and Glacier Creek Contracting.
According to the release from the Finance Ministry:
• B.C. portion of the HST will continue to apply until April 1, 2013. Purchasers will be eligible for the new B.C. HST new housing rebate, up to $42,500, and builders will continue to claim input tax credits.
• B.C.'s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home's final price will again be embedded PST.
• For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double taxation on homebuyers.
The changes are still subject to the approval of the legislature.