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HST Stall Hurts Housing Industry in BC

Since the implementation of the HST in British Columbia in 2010, the provincial housing market has been reportedly in a slump. This has been especially true in Vancouver and area as new builds are sitting vacant longer than expected.According to recent reports, construction companies are resorting to making deals with potential buyers, offering to pay a portion of the HST that is being added to properties costing more than $525,000. While this is helping to persuade new home buyers, the builders and developers are ultimately losing money.Construction companies are frustrated that the BC government is taking its time to reinstate the PST/GST system and are leery of the new PST rules that will come into effect in 2013 with the exit of the HST system. Currently the 12 per cent HST is applied to new homes that cost more than $525,000 whereas prior to the HST, new home purchases were only subject to the 5 per cent GST. And with no transition rules being presented by the provincial government on reinstating the PST, it has industry reps concerned.

Home renovations have also seen a decline since the implementation of the HST, as consumers continue to hold back on major purchases until the PST is reinstated.In addition to the stalls in building projects, the industry is anticipating that more than 8,000 potential construction jobs will be put in jeopardy along with roughly 250,000 related jobs annually–for which the industry is seeking compensation from the government.In response to the stall surrounding the PST the Urban Development Institute is proposing to the provincial government that there be transition rules created to address the move from the HST back to the PST/GST system. The UDI is also suggesting that rebate cheques be offered to consumers who purchase homes above the $525,000 mark and that the threshold be raised to encourage more new home purchases up until the HST is removed.

UDI’s president Don Forsgren is hoping that by looking into transition strategies and minimizing the continued negative effects of the HST on the housing industry that consumers will continue to purchase new homes in the interim rather than holding off until 2013. Representing more than 550 BC developers, the UDI will continue to lobby the government for assistance in this tumultuous season.

With the BC HST Price Difference, What Major Impact Does That Have on First Time Homebuyers?

Although an increase in purchase price of 2 to 5% may not sound like much, we are still talking about thousands of dollars. The new home BC HST tax increase is very substantial even for a small condo that costs $300,000. Do you know of many Vancouver first time homebuyers who can pay an extra $6,140 in BC HST on their new home upon closing? Remember that the major banks are unlikely to finance a 12% HST tax burden, which basically means that the first time home buyer will need to cover the BC HST price difference. Coming up with an extra $6,140 is tough enough, but when it comes to this new home BC HST tax increase for first time homebuyers, it is money out of their wallet that does not even increase the value of their home. The implication of the BC HST price difference and extra tax burden is that many first time homebuyer in Vancouver and British Columbia will stay away from the new construction housing market. The costs and the new home BC HST tax increase for first time homebuyers is too high, forcing many purchasers to either wait and rent for a while or to purchase resale Vancouver property instead. The secondary effect of the new BC HST price difference on new homes is that with fewer first time homebuyers driving the new housing market, the construction industry is likely to suffer. BC new housing sales and construction will drop, forcing many people in the industry to move out of the province or to seek alternate employment.

Not a single new home sold! September 2011
Not one single new home sold in September on the west side of Vancouver. The significance of this cannot be understated. For the past couple of years Vancouver’s west side housing market (along with that of the Vancouver suburb of Richmond) have been red hot. Back in March of 2011, Real Estate Board of Greater Vancouver president Jake Moldowan said in an interview that “it’s a huge sellers’ market, the strongest in those areas I’ve ever seen. And there’s no question that it’s the offshore market that’s focused on these two areas.”According to the March 2011 report by the REBGV, demand for detached homes remained strong across the region, with particularly high sales volumes and price increases in Richmond and Vancouver’s west side. In fact Moldowan said that it’s single detached homes in Richmond and Vancouver’s west side that are the most sought after properties in the entire Lower Mainland marketplace. September 2011 marks the first ‘no new home sale’ month on the west side of Vancouver since records started been complied in 1994. Even the minicrash of 2008 saw four sales of new homes on the west side.”This information has been obtained from sources deemed to be reliable and while thought to be correct is not necessarily guaranteed.”