How will HST affect Buying or Selling a Home in Ontario as of July 1st?
The new tax will take effect on July 1, 2010. The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new “harmonized” total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.
- there is no HST tax payable on the sale of a resale home (residential).
- home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.
In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay – currently there is only the 5% percent GST payable on this fee. Your lawyer’s fee will also be subject to the 13% percent HST.
If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for “high-ratio” mortgages has traditionally been taxable for PST – this amount will now be taxable for the full 13% percent HST.
How will the Real Estate Market React?
It will be interesting to see what the new HST tax does to our Housing Market in Ontario. Certainly affordability is going to be affected as legal fees, home inspection fees, mortgage insurance premiums, and real estate commissions will cost more. Add into the fact that the interest rates are on the rise, our market will inevitably be affected.
