Harmonized tax will increase housing prices: home builders
Homebuilders are worried that B.C.’s proposed harmonized sales tax will add significantly to the price of a new home, and perhaps slow down the market’s recovery.
Rob Grimm, co-owner of Richmond-based Portrait Homes, said in an interview that recent sales have picked up as buyers take advantage of lower prices for homes, but that the new tax — which will harmonize the provincial sales tax with the federal goods and services tax, effective July 1, 2010 — might change that trend.
Like others in the homebuilding industry, he’s concerned the new tax will turn off buyers.
“Costs have come down [and] we’ve had about 35 starts this year, Grimm said of his company, which builds single family homes. “Now, we’re going to reverse that. It doesn’t make sense.”
Under the plan, a partial rebate of the provincial portion of the single sales tax for new housing will ensure that new homes up to $400,000 will bear no more tax than under the current PST system.
However, combining the provincial sales tax with the GST will result in an extra seven-per-cent tax on new home sales over $400,000, although buyers will receive a flat rebate of about $20,000.
Grimm said he’s still not sure exactly how much extra buyers will pay, only that he believes it will be significant. “I haven’t done the calculation yet, but it will add a lot to the bottom line of a house.”
The provincial finance ministry estimates that the additional cost will be five per cent, based on the addition of the seven-per-cent tax and the elimination of the two per cent of new home prices already subject to embedded PST on housing construction materials.
Nevertheless, Grimm said, “it will still mean an increased cost to purchasers.”
He said there was no consultation by the government. “Unfortunately, the government thinks the homebuilding industry can be targeted because purchasers don’t know about all the taxes and fees. I’m very disappointed in this. It’s absolutely stupid. Home building and home sales drive a lot of the economy.”
Greater Vancouver Home Builders’ Association [GVHBA] chief executive officer Peter Simpson said the new tax will significantly increase the cost of buying a new home, although he couldn’t provide numbers.
“We’re seeing marginal improvement and sales increases. But this plan will place another impediment in front of the people and we don’t need an impediment at this time.”
Simpson said he believes there’s room for flexibility on the part of the government.
Scott Russell, president of the Real Estate Board of Greater Vancouver, said in an interview he did not yet know all the implications of the new tax, only that it will result in a big price increase for buyers.
“We certainly feel it will affect the buying public. We’re definitely opposed to it.”
Meanwhile, Keith Sashaw, president of the Vancouver Regional Construction Association, which deals mainly with non-residential construction, said he believes the new HST will result in a lot less paperwork.
“On the non-residential side, we’re supportive of a harmonized sales tax,” Sashaw said.
bmorton@vancouversun.com
© Copyright (c) The Vancouver Sun