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BC HST and Vancouver Real Estate: What will be the Impact?
First the Facts on BC HST! – There’s a commonly held misconception about British Columbia’s Harmonized Sales Ta and that is BC’s HST is payable on all properties transferred in BC after July 1, 2010. This is not the case! BC HST is only payable on brand new properties!
I mention this because many in the media have been saying BC’s HST will have a downward effect on the Vancouver real estate market, because they’re under the incorrect impression all properties will be subject to HST after the July 1, 2010 implementation date. This is not going to happen, but HST may have the following impact on Vancouver’s real estate market.
BC HST Makes Life Tough for Developers
Developing new residential properties in Vancouver is risky and profit is never guaranteed. BC’s HST could make Developers product, that is new residential properties in Vancouver, 7% more expensive as of July 1, 2010. These new properties don’t become 7% better as of July 1, 2010. New properties compete in the same market for buyers as resale properties, which are not subject to BC’s new HST. If you’re a buyer and you have a choice between a six month old property that is not subject to HST and a brand new property that is subject to the 12% HST, which are you going to choose?
Make it Tough To Build and You Could Get Less
By reducing Developers profit margins by 7%, BC’s HST could make more new development projects less viable from a profit perspective for a Developer. Less viable new residential development projects in Vancouver, BC’s new HST could result in less supply for the Vancouver real estate market.
Supply and Demand
According to the Law of Supply and Demand, when supply is reduced and demand steady or increasing, you get rising prices. This could happen with the Vancouver real estate market.
What are your thoughts?
Looking for an HST calculator for a new or presale property in BC? Check out this great HST & PTT Calculator!
Mike I think it is great that you focus attention to the fact that the HST will only be applied to new homes the media does not always draw a clear enough distinction around that.
As for the HST I agree with your conclusions that if I had two choose between a new home and a 6 month old home I would take the 6 month old one.
Now the argument is that the Developers will be able to save on some of this tax and pass the savings on to us the consumer, however that will only apply once we have new developments that have been started in the new HST era thus we should see a lower cost for new home pricing. Although this is suspect considering that property competes against other previously sold properties and is placed in a bidding postion which is unlike other products the HST effects. The developers may down the road see some savings but in the interim I believe it will hamper there ability to compete and I still doubt the savings will be passed on.
There you go!
Hi Chad,
Good to hear from you and thank you for commenting.
The British Columbia government has really done a bad job at communicating the benefits of this tax and making the distinction you mention.
How is the HST impacting financing for new properties?
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Given the facts outlined above, it will definitely push prices up =- I have a developer-built property which I bought just before the HST ( above $800k ) – and very soon it will be competing against similar properties that cost 7% more to build /buy… I doubt that developers will want any less profit, and same with sellers.. that means my property , at even 5 or 6% more than I can get for it now, will look like a bargain next to a property only 6-12 months newer that was paid for in the HST era.
PLUS the fact that as a corporation, I can now get 12% back from HST whereas I only used to get 6 or 7%.
Can’t wait for a year from now!
Hi Diggin,
Good to hear from you and thanks for commenting!
It will be very interesting to see how HST will impact the market. I
I find in everyday life the HST pushes up prices to a noticeably high level that I find disconcerting.
Can you tell me more about this? “PLUS the fact that as a corporation, I can now get 12% back from HST whereas I only used to get 6 or 7%.”
Looking forward to hearing from you!