An Ipsos Reid survey commissioned by the Ontario Real Estate Association released on October 26th, 2010 shows that 56% of Ontario residents mistakenly believe that the new HST applies to the full purchase price of a resale home.
This inaccurate mistake is almost positively not incorrect.
Below are two videos: an interview with Dorothy Mason, the President of OREA, and then an excerpt from Parliament in which Michael Prue goes to bat for home-buyers…
I have to laugh at this, just a little.
They’re talking about how “confusing” the new HST is, and saying that most buyers aren’t certain whether or not it applies to resale homes, but yet Ms. Mason never really spells it out!
They should just yell, “The-tax-does-NOT-apply!”
Have a look at this video as well:
This is MPP Michael Prue going to bat for the real estate industry.
I’ll be brutally honest – I’m not sure if you can directly attribute the drop in sales to the implementation of the new tax, but I believe that it had a good deal to do with it.
Most active buyers were scrambling to buy before July 1st when the HST kicked in, but as we saw above, most buyers incorrectly assumed that there was HST on all real estate.
Imagine that?
Imagine paying 13% on top of your purchase?
You buy a pack of gum for $0.99, and with a 13% tax it costs you $1.12.
You buy a home entertainment set for $2,299, and it ends up costing almost $2,600.
But imagine buying a house in Leslieville for $460,000 and just casually rounding that ‘on up to $519,800!
I shudder at the thought.
But with Dalton at the helm, anything is possible.
Say, when is that election anyways?
Dan
at 10:14 am
Let’s be honest. Many realtors didn’t seem too eager to rectify the general public’s conveniently misconceived notions about the HST when it meant a pool of eager beaver buyers in the Spring. I know more than a handful of people that were told to “get in before the HST” by greaseball real estate agents in ill-fitting sharkskin suits (or at least that’s how imagine them). I find it humourous that CREA is now trying to explain the “actual” impact of the HST with regards to the purchase of resale homes. Why weren’t they doing this back in the Spring. I am sure many buyers would have been happily their purchase if they knew the true, rather minimal, impact of the HST.
LC
at 12:45 pm
Has anyone had “savings” passed on to them, the consumer, from any company or business savings due to the HST? I didn’t think so. What a load of crap.
As for the real estate industry, what is OREA/RECO/TREB waiting for? Get cracking on a campaign to educate potential buyers out there. Otherwise, they get what they deserve by sitting on their hands waiting for the government to do something.
While the HST is not applied to resale prices, it does hit a seller in extra commission costs. Which I imagine would be recovered through higher price listings, so the buyer loses out in that sense too.
Geoff
at 5:40 pm
RE Dan’s comment – I think he has a valid point. And not trying to be a brat, but I’m looking through your archive David and can’t find one posting from early 2010 or late 2009 that specifically pointed out that HST won’t affect resale prices as you’ve outlined here. Did I miss it?
WEB
at 10:04 pm
I know someone who makes $1 million a year, has a Chartered Accountant degree and is President of a financial institution. This person thought that HST applied to the full purchase price of a resale home!
Anyhow, we should consider the fact that the tax when applied to a new home will have an impact on the price of a resale home. If you buy a new home and have to pay the HST on the cost of building it, then the seller of that home will take that cost into consideration when selling. For example, if you have a house built and it costs you $1 million (land cost plus house construction) and you have to pay say $65,000 in HST your total cost of the new home will be $1,065,000. If you were to sell that house, you’d ask a higher price to take into consideration your cost to build it.
West Sider
at 11:15 pm
Didn’t we have this same debate when Toronto introduced the higher land transfer tax?
Realtors used it as a selling tool leading up to the tax (i.e. “buy now, save the land transfer”), and then complained about it afterwards.
Actually — this was even the case with CMHC, but in reverse! I remember the says when the various RE Associations used to call CMHC insurance “unnecessary”, and that it basically amounted to a giant rip-off. Now, those same people use CMHC to get their clients into 5% down/35-year mortgages to keep carrying costs down.
LM
at 1:56 pm
If all those people really do think that HST applies to resale, average house prices 5% higher yr/yr is a resonable performance by the market. If everyone properly understood the HST rules, prices might be even higher with the increased activity that would imply?