The government will raise its new-housing HST rebate threshold to $850,000 from the current $525,000 to help offset the consumer cost of the unpopular tax, until it is finally scrapped on April 1 2013. It will also introduce a similar rebate for new recreational and secondary homes built outside of greater Vancouver and Victoria, to stimulate that market until the tax is gone.
The long-awaited HST “transitional rules” for the new-home market are designed to provide certainty and fairness until the tax is cancelled, said Finance Minister Kevin Falcon. Falcon, who also confirmed for the first time that the HST will be officially scrapped on April 1 2013.
The HST was voted down in last summer’s referendum, and Falcon defended the lengthy timeline for returning to the old provincial sales tax. Falcon said winding down the HST on April 1 2013 is “the fastest date we can get there responsibly” and the transitional rules for new housing will assist a market hit particularly hard by the tax.
Starting on April 1 2012, the government will provide a partial HST rebate on new homes priced at up to $850,000. The amount of the rebate will max out at $42,500, will apply to more than 90-per-cent of new homes, and will mean new home prices will be roughly the same under HST and PST. The HST does not apply on re-sale homes. For secondary and vacation homes outside of greater Victoria and Vancouver, which had been subject to the full HST on the entire purchase price, the government will bring in same $850,000 rebate threshold.
“This will be a very positive impact for the industry,” Falcon said. The government also announced that for newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven-per-cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two-per-cent on the full home price.
New home builders, who earlier complained buyers were waiting on the sidelines until the HST was scrapped, were pleased with the transition rules. “The industry is going to be quite happy,” said M.J. Whitemarsh, CEO of the B.C. division of the Canadian Homebuilders Association. “I think people will get out and start buying again.”