There seems to be much confusion surrounding HST and the impact it has on the local PEI real estate market. Hopefully this will clarify a few of the concerns:
- There is no HST on the price of an existing/used residential home, whether the home is 1 year old or 40 years.
- Previously 5% GST was included in the price of a new home and the GST rebate was generally assigned back to the builder. The rebate was approximately 36% of the 5%.
- Currently HST in the amount of 14% is included in the price of a new home. 9% Provincial and 5% Federal GST. It would appear that the cost of a new home has increased by 9%. It is not as scary as one may think. Previously when a builder purchased his materials at the local building supply he would pay GST and PST on his materials and receive a GST credit only. Currently the builder will get credit for the combined HST, thus receiving more tax credits, which in turn reduces his output costs. These tax credits reduce the HST tax increase of 9% to a more digestable figure of approximately 3%.
- While a 3% increase on the cost of a new home is still significant, remember that under normal market conditions homes tend to appreciate in the 2 to 3% range per year depending on your market area.
If you have questions regarding HST or new construction contact me and I can assist you !