The OntarioProvincial Government delivered a new budget on March 26, 2009 that called for the harmonization of GST and PST. The new HST would be effective July 1, 2010.
The effect of this harmonized HST tax on real estate transactions is as follows:
1. Rents on leases are exempt.
2. Resale homes are exempt.
3. The new tax will apply to "new housing" - there will be a 75%rebate (still paying 2% on the additional 8% PST) on new housing not exceeding a purchase price of $400,000.00; on new housing in the $400,000.00 to $500,000.00 range, there will be a tax credit with the credit declining as the purchase price increases to the %500,000.00 threshold; on all new housing over $500,000.00, the full HST tax of 13% will apply.
4. There will be an increase in "professional service" costs - legal costs will increase with the current GST tax goling from 5% to an HST tax at 13% and real estate commissions will also increase in the same way.
As we get closer to the July 31, 2010 deadline, there may be a flurry of offers for new houses signed. After the cut-off date and for properties exceeding $500,000.00, the resale housing market may greatly benefit from the HST.