Another burden for homeowners
Carolyn Ireland, Globe and Mail
Lots of people have been stopping me in the hallways of the Globe to talk about the Ontario government budget and the impact that the new harmonized sales tax will have on buying and selling houses.
The budget confirms the plan by Dalton McGuinty’s government to harmonize the 8-per-cent provincial sales tax with the 5-per-cent federal goods and services tax.
The new blended sales tax will add a tax burden to many household goods that are currently not subject to provincial sales tax, including the purchase of new homes above $400,000 and the closing costs on the sale of existing houses.
Just yesterday my colleague Clare Jordan was thinking about putting her smallish house on the market and looking around for something bigger now that she’s found out how much ground two-year-old boys can cover.
Today she’s not so sure.
In any already struggling market, will her house be that much harder to sell with more taxes piled on? And will anything she buys become less affordable?
Because Jordan would be selling an existing house, the tax hit would apply only to the closing costs, including the realtor fees that she and the purchaser pay. Then there are the legal services, title insurance and home inspections that the purchaser typically forks out for. These costs are not currently subject to provincial sales taxes.
Taking the example of a $360,000 house, the Toronto Real Estate Board estimates that will add $2,037 to the purchase.
When she buys another property, she would pay the tax on the closing costs as well.
The equation changes dramatically, however, if she purchases a new house that costs more than $400,000 because in that case the purchase price will be subject to the harmonized tax.
Not surprisingly, TREB is unhappy with the change.
“Obviously it’s not good,” was the first reaction of TREB spokesman Von Palmer.
“We’re shocked because we’re still reeling from the land transfer tax,” he says.
Von Palmer points out that home buyers in Toronto are often already paying $4,000 to Toronto and another $4,000 to the province for the land transfer tax.
The harmonized tax does not affect new houses under $400,000: Under that ceiling, the status quo remains, Von Palmer says.
While the issue affects real estate across the province, Toronto’s housing market will feel it more because house prices are higher, on average, he points out.
He says realtors were finally seeing some signs of hope in the city’s property trade after months of sliding sales and price declines.
In the budget, newly built homes that cost more than $400,000 will be hit with higher taxes – ranging from $12,000 to $46,676 in Toronto, according to one study – while the federal government has agreed to drop the GST for those under that threshold.
There’s a sliding scale upwards from there, with houses above $500,000 subject to the full 13 per cent combined tax.
TREB is working with the Ontario Real Estate Association to voice the displeasure of their constituency – real estate agents – to the province.
What about homeowners and prospective buyers? Does anyone care to weigh in?
Will this discourage you from buying or selling real estate or alter your budget?
- Make Home Owners Priority of City Budget A recent study conducted by the C.D. Howe Institute and…
- HST looms over real estate sales The harmonized sales tax looms on the housing horizon. The…
- Better Sales in February As I have said time and again, February 2009 compared…
- A Closer Look at Canada’s Decline in Real Estate Prices For the past couple of months John Pasalis has been…
- Toronto Realtors Ask City Budget Committee to Consider Impact of Land Transfer Tax With a deputation to the City of Toronto’s Budget Committee…