The death of a sales tax is usually cause for celebration. But if you’re from British Columbia, it depends what side of the fence you’re on.
In August, British Columbians voted to repeal the controversial HST in a referendum that had 54.7 per cent of voters in support of rescinding the tax. But with 45.3 per cent voting to keep the tax, the divide was more evenly split than one might think.
The province’s business community, including developers, builders and construction companies, loved the HST because it spread the tax burden to include consumers and veered away from traditional means of taxing business and income.
Given the uncertain economy, business leaders fear that B.C.’s taxes will continue to provide less instead of more in terms of jobs and economic stimulation.
The business community’s concerns are not unfounded. Burnaby realtor Luigi Frascati says the majority of new home and condo buyers are opting to delay buying until March 2013, when the HST is officially repealed and replaced by the previous GST/PST system. Frascati himself happens to be one of those buyers.
On the search for a two-bedroom housing unit, Frascati fully intends to hold off buying until the year after next. “I am one of those buyers,” says the Realtor® who works for Sutton Centre Realty.
While the HST does offer a rebate program on new home sales up to $525,000, Frascati believes the rebate is virtually pointless. “Depending on where you go in this town, a half-million dollars doesn’t get you much of a condo these days, even less if you are looking for a two-bedroom unit like I am.”
According to Frascati, there are a few developers in B.C. offering incentive programs intended to entice buyers not to delay their purchases, but he says the fact is that most people are holding off pending the announcement of a structured re-introduction program on the part of the province.
That may be even more pronounced within the market for higher priced homes and condos, where a buyer would stand to save significantly by waiting until 2013.
RE/MAX real estate agent Sam Wyatt believes the real result of both the implementation and the rescission of the HST is how it will affect the psyches of buyers in British Columbia. Buyers may now think that if they wait till 2013, the HST will no longer apply and they will pay less for their new home. “They may well pay less,” warns Wyatt, “not because they don't have to pay HST but rather, because of the slumping sales as a result of everyone holding off buying.”
Vancouver Realtor® Mike Stewart was a fan of the HST because it reduced costs for developers so he’s disappointed to see it go. He doesn’t think its repeal will have any impact on Vancouver’s condo market. “It was a great tax,” he says. “I was a fan but it was so poorly communicated to the public. The government basically did something that made sense for the business elite of B.C. They always get their pound of flesh, but the general public didn’t understand it. They thought the repeal of the HST meant there would be no taxes.”
Frascati also takes issue with how the tax was presented. He believes the government did a poor job in introducing the new tax, choosing to force it down taxpayers’ throats rather than present it within a forum that promoted public debate. “I think it might have had a different reception then,” says Frascati. “Perhaps taxpayers might have settled for a 10 per cent HST, and perhaps the threshold for the rebate on the purchase of real capital assets could have been set at a higher level than the meagre $525,000.”
The uncertainty surrounding the repeal of the HST is doing more harm than good for the real estate industry, according to a panel of real estate industry experts who spoke last month at a Vancouver Board of Trade event.
Eugene Klein, president-elect of the Real Estate Board of Greater Vancouver told those in attendance that buyers, especially the under-25 group, are sitting on the sidelines. “It’s also affecting home renovation projects with HST on them because consumers don’t know what to do,” he said. Ward McAllister, president of Ledingham McAllister Properties, said he has been “literally begging” the provincial government for transitional rules since the vote to repeal the HST.
“What is amazing to me is that it took the government three days to bring this new tax in and now they are telling us it is going to take up to 18 months to unravel,” said McAllister. “This is really hurting us in the new home business just because of the uncertainty.” Klein and McAllister said they are seeing developers taking on a portion, or even all, of the HST on their product to try and remove that uncertainty for potential buyers.
Despite the worries about the repeal of the HST, housing professionals on the panel predict low interest rates will hold steady into the foreseeable future, which will translate into continuing sales. Added to real estate’s affordability factor, was immigration numbers that show approximately 52,700 immigrants will move to British Columbia this year. Of that total, some 42,000 will move into the Metro Vancouver area, meaning that the need for new housing will remain strong.
Source: PRoperty Wire
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