Harmonized Tax Increases Costs for BuyersUnder the provincial government's plan, the harmonization of GST and provincial tax will make costs related to the purchase of a home, such as lawyer fees, home inspections and real estate commissions subject to the 8% provincial tax. This applies to homes sold for $400,000 and above.
Keep in mind, the additional 8% genearlly applies to closing costs for resale homes, however new home sales will take the major hit as the tax applies to the sale price of a new home.
At a time when the land transfer tax is already having an impact on the market and the economy has it's own challenges, it's hard to believe there was much rationale in this decision. For every home that is not purchased, an average of $33,000 is taken out of the economy in spin-off spending.
We're busy focusing on repealing the land transfer tax, and now they hit with this!?!
Read more below...
Blended tax drives up costs for both new and resale home buyers in OntarioThe Canadian Press - TORONTO — Homebuyers in Ontario will face higher costs for most newly built houses and for services to close deals on resold homes as part of the Ontario Liberal government's plan to harmonize the GST and provincial sales tax.
In its budget Thursday, the provincial government released details of a initiative, which will apply a 13 per cent tax to new homes sold for more than $400,000 starting next year.
The tax plan will provide a rebate for new homes sold between $400,000 and $500,000, though it will fully tax the value of new homes worth more than $500,000.
A 13 per cent tax on a high-end house in Toronto worth $1 million would add $130,000 in taxes on the property, in addition to provincial and local land transfer taxes currently charged.
Resold homes are exempt from the sales tax on their value, but buyers will still face higher taxes on all the upfront costs associated with closing the deal, such as legal fees, movers, real estate commissions and home inspection charges.
The shift will be particularly hard on Toronto residents because they're still reeling from a city land transfer tax introduced last year on top of the provincial land tax.
"The timing of this tax is lousy at best," said Toronto Real Estate Board spokesman Von Palmer.
"The reality is that the timing is never good, but this is bad."
Palmer said that could cause some Ontario residents to be more reluctant to buy.
"We know that housing is the economic engine. Every housing transaction you take out of the economy you lose $33,000 in economic spinoffs - furniture, appliances, renovations," he said.
A recent study from the Building Industry and Land Development Association said that the tax will add an average $46,676 to buying a new home in Toronto - costing home buyers $2.4 billion more each year.
However, the industry group noted there were some measures in the budget to cushion the tax impact, including a rebate of part of the provincial portion of the tax for new homes priced up to $500,000.
"Harmonization of PST and GST without any offsetting measures by the provincial government could have ripped $2.4 billon out of the pockets of new homebuyers, slamming the homeownership door shut in the face of many Ontarians," said Stephen Dupuis, president and CEO of the house building group.
The tax changes sparked concern at the Ontario Real Estate Association which warned that resale homes would face more than $2,000 in extra charges related to closing fees, such as legal services and moving costs.
Currently, Ontario consumers pay only the five per cent GST on those services, but would face a 13 per cent blended tax under the new system.
"Now is not the time to be erecting barriers to home ownership," said Pauline Aunger, president of the association, which represents the province's 47,000 real estate brokers.
"We need consumers to invest in housing to help get our economy going again."
The association, whose members rely on real estate sales for their livelihoods, said home sales in Ontario fell 29 per cent in February from the same year-ago period.
Most experts say the sales slump reflects increasingly nervous consumers worried about job losses and the recession and high prices and rising local taxes that have driven up the cost of buying a house.
"These additional taxes could price some homebuyers, especially first-time homebuyers, right out of the market," said Aunger. "Harmonizing will not help homebuyers in any way."
The industry group said that for a resale house priced at $360,000, a harmonized tax could add more than $2,000 to closing costs. In total, such a tax would add $313 million annually in new taxes to resale home transactions.
Copyright © 2009 The Canadian Press. All rights reserved.
Energy Audit PropositionAdding yet another bump in the road to home ownership and real estate transactions, the Ontario government proposed that every home sold be subject to a mandatory energy audit, costing home sellers approximately $300.
But the cost is not necessarily the issue. The details of how this proposal would be implemented is what's cause for concern. Limited numbers of authorized auditors, standardization of the audit process, and much more.
Read on to find out the implications of this proposal...
Mandatory energy audits on home sales wrong, real estate agents sayGlobe and Mail - KATE HAMMER
February 25, 2009
In the wake of a new municipal land-transfer tax and unmoored by a sinking economy, Toronto real estate agents are bracing for a new storm on the legislative horizon: Mandatory energy audits for home sales.
Ontario Minister of Energy and Infrastructure George Smitherman's proposed Green Energy Act, which was introduced to the Ontario legislature Monday, contains loosely defined "mandatory conservation and energy efficiency practices" that would cost home sellers about $300.
But with homes lingering on a stagnating market, and average sale prices dropping throughout the GTA, even the distant possibility of one more fee or one more bureaucratic obstacle, leaves real estate agents feeling seasick.
"It's not so much the dollars that it costs you to do the audit, I think you have to think long-term in terms of how will that impact your property value, what will that do to the market in terms of potential bottlenecks," said Von Palmer, spokesman for the Toronto Real Estate Board. "So the devil's always in the details and I think that's where we need to be careful."
But "the details" remain fuzzy, and the legislation that was introduced Monday does little to explain the logistics of mandatory audits.
A handful of companies throughout the GTA offer energy audits. Their services vary, but generally involve a battery of tests that measure the efficiency of major household appliances as well as the efficacy of a home's insulation.
"There's several other tests, like they calculate the [efficacy] of the insulation, they check the windows and the window stripping, the efficiency of the furnace, the efficiency of the water heater, the toilets, pretty much anything that can have an impact on the overall efficiency of the home and sort of the energy costs and the energy consumption," said Andrew McRae, an energy representative for EnWise Power Solutions.
Homeowners are also eligible for government rebates toward the cost of the inspection, as well as thousands of dollars more toward implementing suggested upgrades. Most energy auditors will also handle the necessary paperwork for a government rebate.
Some homeowners benefit more than others from an energy audit, according to Mr. McRae. Most modern appliances and materials are relatively energy efficient, and the owners of newer homes may struggle to recoup to cost of an audit, he said.
Sales in Toronto have been down every month since the land-transfer tax was implemented in 2008, according to Mr. Palmer. They plummeted more than 23 per cent in the first two weeks of February this year compared to the same period last year, while the average sale price fell nearly 8 per cent, according to data collected by the real estate board.
The 450 inspectors throughout Ontario will quickly become overwhelmed attending to the hundreds of thousands of homes sold within the province every year, and more will have to be trained to meet the demands of mandatory energy audits, Mr. Palmer said.
Additionally, issues such as standardization, timing, and payment will have to be worked out.
"There's going to be some coinciding policies that need to be made as well that would include the specifics around the energy audit," said Amy Tang, a spokesperson for Mr. Smitherman. But what shape those policies would take, Ms. Tang couldn't say.
Median prices in the prestigious environs of the MLS zone known as C3 rose by almost nine per cent in September, then tumbled by 25 per cent in October and 15 per cent in November.
Median prices in C4 declined over September, October and November by seven per cent, 17 per cent and almost 32 per cent, respectively—proof that million-dollar homes are the first to tumble in a recession.
The C11 zone is home to the Bayview strip of decor stores and gourmeterias. Close to the action, houses sell for a million, and farther out, they sink into the $300,000s. But with drops of 19 per cent, 54 per cent and 39 per cent, it’s clear that nice as it is, this upscale stretch is no match for its more central counterparts.
