Do new BC homes cost less under the HST?

With Harmonized Sales Tax (HST) referendum ballots arriving in mailboxes, Chilliwack's MLAs are ramping up support for the "No" side in favour of the controversial tax.

The latest angle is new home purchases, and Chilliwack MLA John Les and Chilliwack-Hope MLA Barry Penner found a local developer to speak in favour of the HST.

Jake Siemens of Landmark Realty says the homes he is building on Promontory are less expensive with the HST than they would have been with the PST/GST.

"In the Chilliwack area, the HST has lowered the cost of the average new home we are selling at Jinkerson Vistas by between $900 and $2,200," said Siemens, in a BC Liberal caucus press release issued Tuesday.

Under the PST/GST tax regime, PST was added to the cost of paint, nails, lumber and anything else purchased by a home builder. These embedded costs turn up in the price, adding an estimated two to three per cent to the price of a home, according to Brendon Ogmundson, economist with the B.C. Real Estate Association (BCREA).

"With a harmonized tax system, the extra cost incurred because of provincial taxes disappears and the total construction cost, and therefore competition, should force the final selling price lower by the amount of the tax," Ogmundson told the Times.

When the HST implementation was first announced, the threshold for a new home to receive rebates was $400,000, but that was quickly raised to $525,000.

Initially the BCREA came out against the HST because of this low threshold.

"The bottom line is that the HST has increased the cost of buying and selling all property, and it has a much greater impact on the purchase of newly-built homes," the BCREA still says on its website. "Almost 60 per cent of the average family's household income is required to cover home ownership costs. Now that the HST has been implemented, they're paying even more."

But Ogmundson said that changed (and added that the BCREA's website should be updated) when the threshold increased, something that does indeed apply to Chilliwack new homes where the average single family home price is approximately $445,000.

"The statements in the press release from Mr. Les and Mr. Penner regarding the impact of the HST on new home prices are economically sound," Ogmundson said.

Under the $400,000 threshold, a $445,000 new home would have had an approximately $2,400 increase in cost under the HST. Since that threshold was raised, the cost of the same home would indeed come down, according to Ogmundson.

"This is great news for home buyers," said Les in the press release. "Not only does the HST lower the hard costs for builders, but it's now easier for first-time home owners to enter the housing market."

HST does not apply to the price of used homes, but other services connected with real estate are impacted, including: home inspectors, appraisers and commissions paid to realtors.

Source: Paul Henderson, Chilliwack Times