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!