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?

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

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