It’s frustrating when well-intentioned organizations set out to eliminate confusion and end up raising more questions than they answer, but that’s how I feel about the Ontario Real Estate Association’s efforts to clarify the situation with respect to the Harmonized Sales Tax on resale homes.
Last week, OREA released a poll showing that 56 per cent of Ontarians mistakenly believe that the HST applies to the full purchase price of a resale home. In its news release, OREA states “in fact, the HST is only levied on the various transaction fees associated with the purchase of a home that has been previously occupied (i.e., not a newly built-home).”
This statement creates the same false impression with respect to new homes that OREA was seeking to dispel with respect to resale homes.
The blanket implication ignores the fact that the 75 per cent provincial HST rebate on the first $400,000 of the price of a new home, combined with the new input tax credits, means that new home buyers are no worse off today than prior to the HST.
Would-be new home buyers should keep in mind that on new homes priced above $400,000, the HST only applies on the increment, not the whole house price, and that the maximum $24,000 rebate applies regardless of the price of the new home being purchased.
I’m not running for president of the HST fan club, but it’s important for new home buyers to understand the huge concessions made by the provincial government to ensure that the HST did not undermine housing affordability and choice.
My advice to homebuyers is to compare new homes to resales on a bottom-line basis, taking into account taxes as well as commissions.