Scrap the tax?

By Shawn Lackie

We all know politicians say the darndest things, especially when campaigning. I won’t go into the madness happening south of us, just now. Let’s stick with the land of poutine, maple syrup, and butter tarts. We can’t forget those tasty little morsels.

At any rate, the leader of the PC party just announced he was going to scrap the sales tax on new-build homes, priced at under 1 million dollars (cue Doctor Evil). Sounds good but what does it mean?

For years young buyers have been stepping up and buying homes in newly created subdivisions, with somewhat odd names. Usually something which gives off an atmosphere these houses would be “special”. That falls under Marketing 101.

I digress. When these first-time buyers walk in, all excited, to be

purchasing a brand new home, free of defects and with nothing to worry about, the selling agent couldn’t be happier.

Then the process starts around upgrading. If you add a certain style of flooring it would be x amount of dollars more. Did you want regular counter tops or upgraded? That would be more. Did you want garage access from the basement? That would be x amount of dollars more.

Well, you get the drift. So, when all is said and done, the initial purchase price bloats to another 100-150K or more (or less). The point is, it’s not what was originally envisioned by the buyer. Here’s where it gets tricky. If the buyer wants to include all of the upgrades in the purchase price, adding it to their mortgage, and pay for it over the long run, it could be onerous.

I have long advised clients to buy the home, and agree to the purchase price, as is. If you want upgrades, take an LOC and pay for them separately. At least you won’t be adding that total to your mortgage which you will be paying for the next 20-40 years, on compound interest no less.

That would affect what you pay for taxes. The Conservatives estimate the new measure will reduce the cost of an $800,000 home by $40,000 and spur construction of another 30,000 homes per year. Also included were scrapping the housing accelerator fund which offers homebuilding money to cities, if they adjust bylaws and regulations, considered barriers to new construction.

Pierre Poilievre said, a Tory government would also abolish the housing infrastructure fund which sets aside $5 billion for agreements with provinces and territories, in exchange for adopting certain housing policies.

All of these plans are aggressive indeed, and come at a time when the housing market, in general, has pretty much flat-lined and new builds have slowed down as well, contrary to the fact there remains a huge need of homes to satisfy buyers waiting to get in to the market.

Buyers currently are charged 13 percent HST on a newly built home. This tax is broken down into two segments, 5 percent being the federal portion and the remaining 8 percent being the provincial part.

People buying new homes, currently, can get a rebate, on the GST they pay, of up to 36 percent, to a maximum of $6,300, for homes valued at $350,000 or less. For homes valued at more than $350,000 and up to $449,999, the rebate is gradually reduced, until it reaches zero, for homes $450,000 or more.

Additionally, don’t forget the Land Transfer Tax. Whenever you purchase land in Ontario, whether it is an undeveloped property or a finished home, you will be charged a land transfer tax. Buyers are required to pay the land tax when the sale closes. The cost is based on the value of the property purchased. However, if you are buying in Toronto that total is doubled, since they added the extra tax in 2008. It’s no wonder then, why buyers are all taxed out.

Time for some welcome relief.