There’s No Place Like Home – If You Can Afford the Taxes
Dec 04,2010
Please click Podcast listen to Cantonese interview
Presentation to the Select Standing Committee on Finance and Government Services • John Les, MLA, Chair
By Sylvia Sam, Chair, Government Relations Committee, Real Estate Board of Greater Vancouver • October 15, 2010
The story they tell is the same. They’re potential home buyers, eager and even desperate to buy a home in Canada’s most expensive housing market. Coming out of one of the worst recessions, they’ve managed to hang onto jobs and through sheer effort and thrift, they’ve saved for their downpayment, needing every cent and more.
Then comes the surprise and the shock when they realize they’re unprepared for the overwhelming taxes associated with the purchase of their property.
First it was the Property Transfer Tax (PTT), which adds about $16,000 to the average price of a detached home in Greater Vancouver. Now, new home buyers must also pay a 12% Harmonized Sales Tax (HST), which is 7% more than they used to pay with the Goods and Services Tax (GST).
Fence sitters are candid: paying both the PTT and the HST is too much. In the Board area, fewer and fewer potential home buyers can afford to buy a small starter home even in an outlying area. Even modest condominiums are taking longer to sell. Wary buyers wait, hoping the HST will be eliminated following next year’s referendum, while they calculate taxes in the Lower Mainland that are more than twice those of other areas across the province due to the higher home prices.
Over the life of a mortgage, the $96,939 in taxes (see table below) that a Metro Vancouver home buyer pays will cost a total of $152,976, using a 4.00% mortgage rate and 25 year amortization, with monthly payments of $509.92.
How have home buyers in Greater Vancouver reacted to the HST so far?
In the two weeks leading up to the July 1, 2010 implementation of the HST, home buyers jumped off the fence and into the market. In contrast, home sales in the two weeks after July 1, 2010 dropped 16%. (see chart opposite)
Although REALTORS® continue to inform buyers that the HST applies to new homes only and that there is a rebate program, buyers incorrectly believe the HST applies to all properties, including resale properties according to a recent survey.
The results of the misperceptions are clear. In the last two months MLS® home sales have further fallen and we’re hearing that home buyers are holding off buying a home until next year.
pls click here to enlarge the chart
