What's Taxable Under the HST and What's Not?

• According to Ontario Ministry of revenue there are a lot of products and services on which we already pay the RST and GST. For these products, like cable and phone services, new cars and adult clothing, there won't be a change. On July 1, 2010, instead of paying 13 per cent tax to two different governments (8 per cent provincial and 5 per cent federal), there will be one tax — still 13 per cent, collected by the federal government.
• No RST now, no HST after July 1, 2010. There are some other items now that have no sales tax on them, such as basic groceries, municipal transit and prescription drugs. On July 1, 2010, there will still be no HST charged on these items.
• Point-of-sale rebate, Other products will be eligible for a point-of-sale rebate for the provincial part of the HST. This means you will only pay the 5 per cent federal portion of the HST. These include print newspapers, books (including audio books), diapers, children's clothing and footwear, children's car seats and booster seats, feminine hygiene products, and qualifying prepared food and beverages sold for $4.00 or less.
• No new tax for 83 per cent of products and services. In total, about 83 per cent of products and services purchased by consumers will see no new tax. Only 17 per cent will see a new tax, things like personal and professional services such as hairstyling and legal fees, as well as energy costs including home heating fuel and electricity.

Here are examples of common products and services and how they will be affected by the HST.

Source: Ontario Ministry of Revenue

GTA REALTORS® Report Mid-Month Resale Housing Figures

Greater Toronto REALTORS® reported 4,887 sales through the Multiple Listing Service® (MLS®) during the first two weeks of May.

This represented a seven per cent increase compared to the 4,561 sales recorded during the same period in 2009. New listings increased by 48 per cent annually to 10,059.

“The average household looking to purchase a home continued to benefit from affordable opportunities in the first half of May,” said Toronto Real Estate Board President Tom Lebour.

"The number of done deals will remain high for the remainder of 2010, but will dip from record levels.”

The average price for May mid-month transactions was $448,641 – up 12 per cent compared to the average of $399,811 recorded during the first 14 days of May 2009.

"The total number of homes currently listed in the GTA is now within a more normal range. As buyers benefit from more choice in the second half of 2010, average selling prices will grow at a slower pace," said Jason Mercer, TREB's Senior Manager of Market Analysis.

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Source: Treb

How will HST affect your real estate transaction?

The Ontario Government recently enacted legislation which will implement the HST Tax. This new tax will take effect on July 1, 2010. The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new "harmonized" total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.

• there is no HST tax payable on the sale of a resale home (residential).
•  home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.

In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay - currently there is only the 5% percent GST payable on this fee. Your lawyer's fee will also be subject to the 13% percent HST, as will the cost of a Condominium Status Certificate.

If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for "high-ratio" mortgages has traditionally been taxable for PST - this amount will now be taxable for the full 13% percent HST.

 

As legal fees, home inspection fees, mortgage insurance premiums, and real estate commissions become subject to additional taxation under the new Harmonized Sales Tax regime, housing affordability will suffer.

Current owners in urban areas will be impacted as well; condo fees are expected to increase 5-7% as management fees, concierge services and utilities will be taxed under HST.

Renters will be hit as landlords pass on the higher costs soon to be associated with electricity, gas, cable, maintenance, property management, and other services.

The Federation of Rental-Housing Providers of Ontario (FRPO) estimates an increase of 2.5% to 3.0% in residential rents as a result of the HST.

The Cost for "New" Housing (not applicable to resale):

Under the new proposal, all price ranges would receive a 75 percent rebate on the provincial portion (75percent of 8percent) on the first $400,000. Up to a maximum rebate of $24,000.

New homes under $400,000 would not be subject to this additional new tax.

The new HST tax will not apply to sales of new homes where ownership or possession is transferred before July 1st, 2010.

Housing Market Charts

Along with the monthly Market Watch release there are a series of charts summarizing key residential statistics for the GTA.

Market Watch

April Experiences Record Number of Buyers and Sellers

May 5, 2010 -- Greater Toronto REALTORS® reported 10,898 sales through the Multiple Listing Service® (MLS®) in April, representing a 34 per cent increase compared to April 2009. There were also 20,683 new listings in April – a 59 per cent annual increase. Both the sales and new listings results amounted to new records for the month of April under the current Toronto Real Estate Board (TREB) boundaries.

“The GTA resale market is functioning properly. Sales were high as buyers continued to take advantage of affordable home ownership opportunities. Listings grew as home owners reacted to strong sales and price growth,” said Toronto Real Estate Board President Tom Lebour. “More balanced market conditions will result in sustainable rates of annual price growth in the second half of 2010.”

The average price for April transactions was $437,600 – up 13 per cent compared to the average of $385,641 recorded in April 2009.

Source: Treb