Don't be surprised ...Thinking of selling your home? -- well there's always next year.
But wait .. next year may be too late. The new 13% harmonized sales tax comes into effect in Ontario on July 1, 2010, and it will likely hit the whole housing market hard. If you haven't sold by July 1, you may well be out of luck. And if you haven't bought by then, well, maybe you'll want to change your mind. And the funny thing is, hardly anyone seems to realize it.
"There are going to be a lot of very surprised people on July 1," says Jim Flood, director of government relations for the Ontario Real Estate Association. "It's a massive tax increase."
So here's the bad news: Although resale houses will not be taxed, everything to do with the sale will be -- the house inspection, the agent's commission, the moving costs and legal fees.
There will even be tax on the home energy audit all sellers are now compelled to carry out thanks to the Green Energy Act the McGuinty government passed in May. And speaking of the home energy audit, why isn't anyone concerned about that?
Altogether, that means the extra tax on a resale house priced at $369,000 will come in at roughly $2,000 (largely the tax on the agent's commission) and double that and more on many ordinary houses in Toronto, before you even remember you have to pay Toronto's onerous land-transfer tax, too.
It's enough to make you wonder exactly why you're thinking of moving. Or to get you packing your bags and calling the mover today.
But it's worse news for new home buyers, although not as bad as it was originally expected to be. Under pressure from groups like the Ontario Home Builders Association, the province has decided not to levy the tax on the first $400,000 of any new home purchase. (GST has been payable for a number of years but builders tend to hide it in the house price.)
So on a $500,000 house, the extra HST hit will be $6,000 instead of $30,000 (builders get a 2% tax credit that lowers the overall tax hit from 8% to 6%). Without that change, the loss of a potential 21,200 jobs in the GTA alone looked probable. That's enough to scare off first-time home buyers and potentially many other people struggling to make ends meet.
Easy, according to the OREA's Flood: "There's a lot of ignorance. I don't think the average consumer is even aware of the tax." The HST will impact many things you haven't even thought of yet -- but the housing-related taxes are killers.
How new tax adds to cost of a sale:
Realtor Commission $1,100- $1,700
Mortgage insurance $470
Legal costs $80 *
Home Inspection $32
Title Insurance $15
Total $1,747 -$2,297
(Estimates based on house less than $400,000, from Ontario Real Estate Association)