Thus far I have not commented on the pending harmonization of the provincial sales tax and the federal GST which will bring forth HST on July 1st 2010. Frequently I am asked by clients what impact this is going to have on the housing market and despite all of the negative media doom and gloom this latest tax grab is causing, my thoughts are as follows:
As Canadians we live in one of the most heavily taxed nations there is. Between high rates of personal income tax, ever increasing property taxes, provincial sales taxes, the GST, excessive taxes on gas, booze, cigarettes and so on, it seems that there is always another hand(s) in our pockets. There was a great hue and cry when the GST was first introduced but did we stop spending? Yes we bitch and complain about our taxes but ultimately life goes on and our standard of living doesn’t suffer too badly.
The Ontario Real Estate Association has lobbied strongly to no avail against the province of Ontario over the implementation of HST claiming that it will add between $1,400 to $1,500 to the average real estate transaction in Ontario. This is expected to perhaps cause a flurry of buying activity in the first 6 months of 2010 after which who knows where the market will go. My thought is will $1,400 or $1,500 really impact a person’s ability or mindset to purchase a home?
The average house price in the Georgian Triangle to the end of November is $286,000. An additional $1,500 in taxes on that purchase represents 1/2 of 1% of the purchase price. In many cases people are paying more for 1 month’s rent.
So is the real estate market going to collapse after July 1st next year? Somehow I doubt it. As Canadians we’ll suck up yet another tax and life will go on. Canadian real estate has historically appreciated in value at such a rate that another tax will hardly impact the rate of return most of us have come to realize. One aspect of real estate that may feel the impact is new housing and I will cover that in my next posting.
The HST will mean better jobs and will allow more people to realize the dream of home ownership.
The Canadian Centre for Policy Alternatives issued a report looking at low-income, middleclass and wealthy families and found that the HST is going to be revenue neutral.
A recent report by the TD Bank estimates the HST will reduce cost of doing business in Ontario by roughly $5.3 billion and that the majority of cost savings will be passed on immediately to consumers.
A report by economist Jack Mintz, “Ontario’s Bold Move to Create Jobs and Growth” confirms that Ontario needs to reform its tax system to create jobs and put Ontario back on its feet. It says, as a result of the HST, within 10 years Ontario would see:
o An estimated 591,000 additional new jobs
o Increased capital investment of $47billion
o Increased overall annual worker incomes of up to 8.8 per cent, or $29.4billion
As a result of moving from two taxes to one, businesses across Ontario will save $500 million in paperwork costs. Realtors will receive tax credits for the things they need to run their business from vehicles to computers. As in other industries, realtors will be able to pass on savings to their customers.
Realtors have to ask themselves, are they going to hoard massive profits or be fair to their customers. We ask consumers will have to watch this too and chose our representative accordingly.
This is being done to create jobs. As the TD report stated, the HST “should help spur business investment, employment and income growth.”
Please visit: http://sites.google.com/site/thetruthaboutthehst/