When purchasing any goods and services, the small taxation that is added to purchases at an escalating amount is something that we are all used to. In Canada, specifically British Columbia, citizens are accustomed to the provincial sales tax (PST) set at 7% and the goods and services tax (GST), set at 5%. These taxes are going to be combined starting July of this year to create a 12% tax added to a number of goods and services that were previously exempt from either the GST or PST. This HST tax has the potential to adversely effect both home buyers and sellers through the British Columbian province.

This new tax is being sold as a boon to the economy with no impact for buyers of homes under $400,000. Realistically, the median home price is well above $400,000 in many parts of British Columbia which boasts one of the highest real estate markets. The impact on sellers is clear – there will not be as many buyers able to afford the 7% increase in taxes that was once only a 5% GST.

For homes priced under $525,000 there will supposedly be a rebate that will refund 5% of the housing cost to offset the costs to both sellers and buyers. This rebate is only a small buffer for an increased tax across the board.

For a home priced at $600,000, the total tax of the HST would equal $72,000 – a substantial number. If a consumer were to be able to receive a rebate on a home of this price and it is not clear that would be the case, the adjusted taxes would equal $52,000. As of now the only tax on homes would be the GST, which would only equal $30,000. The HST inflates taxes by $22,000 and that doesn’t take into account all of the other areas that the HST would be worming its way into. Sellers will be hard pressed to find buyers.

The HST is applied to practically everything involved in the purchase of home including real estate commissions and legal fees. The asking prices of a home will no longer be indicative of the increased costs associated with the implementation of the HST.

This blanket-wide price increase will also be applied to the aspects of living in a home past the sell date. These services include internet and phone, cable and heating, as well as gas and electricity. Having to factor in the increased cost of living with the cost of buying a home will give buyers cold feet and put home sellers at a distinct disadvantage, having to maybe think about lowering prices.

This housing conundrum may create a housing market that is stagnant.

Stagnant housing markets adversely effect the overall economy of any area, as the health of this market is an indicator of good economic times. The new HST tax and how it affects home sellers and buyers will be that real estate will become more of an ordeal that ever before, as well as ingratiating itself into other areas of life and services from haircuts to funeral services. 12% additive tax on a small number of items and services may not make a huge impact, but having 12% added to practically everything will have the opposite effect that is intended.

Get more information today on the many factors affecting home sellers and buyers at the Salt Team Blog today! Lisa Salt at RE/MAX Vernon can answer all your questions regarding Vernon Real Estate.