The people of B.C. have spoken, and their plans to axe the HST are poised to grow originations for brokers when homebuyers snatch up new high-end condos now idling on the market. But there may be some “short-term pain” to get through before that payday.
The decision to scrap the HST may slow the purchase of new housing product until closing dates can be aligned with a firm GST conversion date,” Dustan Woodhouse, broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland, told MortgageBrokerNews.ca. “However, it may well release some pent-up demand in the immediate weeks following that date. Either way these are likely smaller blips in the overall market.”
While critics of British Columbia’s harmonized sales tax got their way with last week’s referendum, the axe won’t come down until March 2013. In the meantime, new homes, outside of any provincial rebate for those less than $525,000, will continue to attract 12 per cent tax. After March 2013, that tax burden drops by 7 percentage points, with homebuyers of new construction (over $525,000) then having to shell out GST only.
Currently, a $750,000 purchase, for example, attracts an HST bill of $63,750. After repeal, and the return to use of the GST program, said Woodhouse, that net tax bill will be $24,000.
The significant gap should ultimately accrue to the benefit of brokers, said Sean Manoochehri, a broker with The Mortgage Centre - Elder Mortgage, in Vancouver. “There are a significant number of new higher-end condos sitting in Vancouver because people are not buying them, in part because of the HST bill. Eliminating it, makes those properties more attractive to buyers, but it also should bring more buyers, and potential clients for brokers, into the market.”
That won’t happen for another 18 months, although the government is now under pressure to speed up implementation. As Woodhouse suggests, Realtors and brokers may, in fact, experience a slowdown in activity ahead of the HST repeal, as clients hold off on buying.
Still, there is a potential upside, even in the interim, for brokers, who, after all, get paid based on the mortgage amount.
“Perhaps the lag time will cool new construction slightly, which ultimately will tighten supply and increase prices,” Woodhouse told MortgageBrokerNews.ca