Realtors say combining the 5% Goods and Services Tax with the 7% provincial sales tax would likely have only a minimal effect on prices in the Nanaimo market, but home builders are already predicting a chill in new home sales when the new tax takes effect on July 1.
The HST would add 7% in provincial sales tax to goods and services currently subject to GST only.
B.C. plans to use the same model as Ontario for new homes, with builders able to claim back up to $20,000 worth of "embedded" provincial sales taxes paid to suppliers on materials.
There would be a $400,000 threshold on the HST, meaning new homes listed for less than that amount would not pay additional tax over what they would now. Above that, a sales tax rebate worth up to $20,000 would kick in.
But there is plenty of confusion around what the tax will mean, so Nanaimo realtor Charlie hired accountant Doug Tyce to calculate the actual taxes for houses at three different price points.
Developers say $400,000 is too low in B.C., where land prices are much higher than Ontario. They want the tax threshold raised and to index it to inflation.
Realtors and developers both say government has been slow in responding to their enquiries about how the tax would apply. Government did say when announcing the tax those details would take time to sort out.
By estimating $8,000 in PST rebates for building materials for a new house listed at $400,000, Tyce calculated the buyer would pay $419,440 under the HST, which is actually $560 less than under the GST alone.
HST adds $47,040 to the cost, versus $20,000 with GST alone but after the builder claims back $19,600 in "embedded" PST costs, the price is reduced slightly.
Move up to a $550,000 house and the HST adds $7,300 or 1.2% to the cost, after the builder claims $20,000 and reduces the price accordingly.
The selling price rises 2.25% on an $800,000 house.
"Under the ideal example, everything works as it should work, a $400,0000 house should not cost the purchaser anything more than it does," said Tyce.
The actual effect on prices would be determined by the market.
"You can imagine people won't go 'next house I'll build I will rebate 100%, or keep it on,' " Parker said.
"What I'm saying is that $395,000, where does that come from? Typically the builder and the realtor sit down and say this is X. In fact it will be the consumer who at the end of the day will decide what it's worth."
Builders say market forces would require them to lower their prices to reflect those tax credits.
"We believe most builders will pass it on, if it's passed on to them," said Rob McCallum, Canadian Homebuilders Association Nanaimo president.
"The key point from our end, the threshold is too low at $400,000, and indexing."
McCallum said using Central Mortgage and Housing Corp. numbers, the average new house sells for $449,900 in Nanaimo, meaning many average buyers will pay the HST.
Read the full article by By Darrell Bellaart, The Daily News at
http://www.canada.com/Impact+hard+predict/2231991/story.html