Myths about HST and Vancouver Real Estate Market

Ignorance about HST is causing a chaos on Vancouver real estate market. Every prospective home buyer, real estate agent, mortgage broker have their very own interpretation of HST on real estate transaction.

It’s a myth that housing market is down due to HST. HST could be a great opportunity for everyone involved in the housing market to bring in more sales. HST should not be blamed for a downtrend in housing market.

With the implementation of HST in BC, a new housing rebate program was introduced, to offset the additional HST burden on home purchase. Its an exciting program and it should attract more home buyers in the market.

A prospective new home buyer can purchase a brand new home with no HST, by using BC new housing rebate program. Most of the first time home buyers trying to get their first primary residence are qualified for this program. Beside that, homes for resale are not subject to any HST.

As per the BC new housing rebate program, after implementation of HST, if someone buy a new house valued at $525,000, using the program they do not have to pay any HST. The housing rebate of $26,250 caps off at $525,000. If the property cost more than $525,000, the buyer will pay HST on the additional amount above $525,000.

Also, one very important thing to remember or mention to the prospective home buyer that even Real Estate HST rate is 12%, BC portion of HST rebate of 7%, brings down the effective rate of HST to 5%.

Since HST is a tax on consumption, the higher the property value will be, the more your HST the buyer will pay.

For a property costing $525,000 there is no difference in cost for before HST purchase or after HST purchase.

But for a property costing $1 million after HST purchase puts an additional burden of $20,000, than it would have cost before HST, or 2% of additional tax due to HST.

So, for majority of BC new home buyers, HST does not have any impact at all, with BC new housing rebate program.

For a million dollar home the net impact of HST with BC new housing program is only 2%. And it starts to go up, with the increased purchase price of the housing.

It is well known that Vancouver home prices are inflated and if someone knowingly investing in that market, a 2% additional tax on a million dollar home purchase, should not make a significant difference in their purchasing decision. For high end home buyers its a choice between paying 2% HST now, or wait and pay 5% inflated price for the property few months later on top of more than 2% HST.