HST impact on real estate
There is a lot of misconception about the HST and it's impact on the housing market overall. In truth, it is an excuse if you let it be.
For many Alberta buyers who are not conditioned to sales tax scenarios they only need one excuse but in the majority of instances whether it is a retirement or move up purchase, the HST and its impending reversal or rearrangement should have little or no effect on the value of the majority of real estate transactions in the market currently.
For starters, HST would apply in only a limited number of scenarios and if you are considering a purchase, remember you should always check with your accountant on the specific details. Those scenarios are very typically:
- A new home (unless it is on a First Nation lease).
- A pre-owned resort property that had originally been purchased for revenue and the original buyer had claimed an input tax credit or deferred the initial GST or HST.
- A residential home that had been purchased by an entity with a GST/HST number for other uses that allowed them to defer GST/HST or claim an Input Tax Credit.
- A residential home that had a home based business located within it and could be considered to be a "business purchase".
These scenarios and a few others will likely allow you to have a serious discussion with your accountant about the likelihood of GST implications but remember every situation is very different and even our friends over at CRA cannot always clearly define a situation that triggers a tax liability.
If we look at the current market, many larger scale condo developers are either in foreclosure or attempting to avoid foreclosure with a Forbearance Agreement (meaning the banks will delay the foreclosure procedure with certain conditions). That being said, most of the new sales from these types of developments are being sold with some very serious incentives that may include a hefty discount from the original sales price and perhaps the developer has offered to cover the cost of the HST.
You can see from the above that the HST has minimal impact on the Okanagan home sales situation. Of more concern is what will the BC government do to replace the substantial lost revenue from backing out of the HST? Your guess is as good as mine, but it won't be anything other than another tax, which will likely be a catch all Provincial Sales Tax! Perhaps the HST wasn't so bad after all!!!
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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.
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