As you probably know, the Harmonized Sales Tax (HST) is coming into effect on July 1st of this year.
The Ontario Real Estate Association (OREA) strongly opposed the implementation of the combined 5% GST and 8% PST, but there is no reason to be scared out of buying a home in the near future.
Understanding how the HST will affect you as a homebuyer will help you decide whether buying a home before or after July 1st is right for you.
The first thing you should know is that the HST will not apply to resale homes. This means you won’t have to pay extra tax on homes that have already been lived in and are not brand new. However, the HST does apply to services related to real estate transactions including legal fees, real estate commissions, home inspections and moving costs.
OREA estimates that you’ll pay an additional $1,500 on the average residential real estate transaction.
If you’re planning to buy a new home, the HST will apply, but what you should know is that you’ll receive a rebate of up to $24,000 on homes that cost $400,000 or less. Ontario Government says this will make it so the average homebuyer doesn’t pay any more than they did on the PST system.
Unfortunately, if your sights are set on new homes over $400,000, which they may very well be if you’re a city dweller, you will be subject to the additional eight percent tax.
National Post article on the HST quoted the spokesperson for the Ontario Ministry of Finance, Alicia Johnston, as saying, “Only 7% of home buyers will be affected by the new tax.”
If you are part of this 7% and are planning to buy soon, it may be worth your time to start working with a real estate agent and squeeze in some extra viewings to see if you can find the home you’re looking for before the HST comes into effect this summer.