Of all the issues that galvanized the public against the Harmonized Sales Tax (HST) that was implemented in July 2010 - and scrapped last summer after a province-wide referendum - the addition of HST to new home sales was one of the most contentious, adding five per cent tax to every purchase. With the average home price in Vancouver hovering around $800,000 it was a sizable hit.
Finance Minister Kevin Falcon came to the rescue last week (Feb. 17) by announcing the transition rules that would be in place until the HST could be replaced with the mixed GST and PST in April 2013. Among those rules were concessions to the housing industry, which has been slumping since the referendum.
The main concession 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 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.
Bob Deeks at RDC Fine Homes, said that they did see a slow down in business since the HST was ended, and that things appear to be picking up since the transition rules were announced.
"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. Previously with the lower threshold that credit was not available," he said. "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."
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.
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