Emil Khattab - Exceeding Expectations - One Property at a time

The HST Effect

The HST Explained: How The New Tax Affects Your Resale Home Purchase


With the introduction of the Harmonized Sales Tax (HST) on July 1st 2010, a new 13% tax replacing the 5% GST and 8% PST, many still don’t quite understand how it affects their home purchase.


The short answer is that HST does apply to specific parts of real estate transactions, such as:


  • Agent Commission
  • Lawyer Fees
  • Home Inspections

However, it does not apply to the cost of a resale home itself. It’s does however apply to new construction homes, with most builders hiding HST within the purchase price. However, government rebates and exemptions for buyers of brand new homes have in fact softened the blow.


That being said, let’s take a deeper look as to how this new tax has affected our perceptions and the real estate industry overall.



Market Confusion

It’s understandable for those of you who are a little confused, since there are exemptions, rebates, and other factors that make understanding this new tax difficult.


Studies revealed that several months after the HST’s introduction, 46% of Ontario real estate agents were still confused about the HST, to the point that it was affecting the market. Similarly, a survey by the Ontario Real Estate Association revealed that 56% of Ontarians mistakenly believe that the HST applies to resale homes.


While understanding of the HST has improved greatly since it’s introduction, especially among agents, there are still a handful of people out there that can benefit from knowing the truth about the HST.



Impact On Condos

Condo owners and prospective buyers of condos are still wrestling with the impact of the HST. Even though new condo buyers have escaped the HST on purchase prices thanks to government rebates and exemptions, other condo costs are still susceptible to the new tax and are not exempt.


Condos fees specifically are not subject to HST. However, there’s a catch. The costs of the condo corporation that operates a condo building on the owners’ behalf are faced with the HST. Therefore, condo fees – to cover services such as concierge, landscaping and repairs – are raised. To compensate, condo fees have risen 5-7% since the HST came into effect.



Bottom Line

As unpleasant as the HST is, homebuyers should consider this fact: it could’ve been a lot worse. Premier Dalton McGuinty, the man responsible for this new tax, urged the federal and provincial governments to increase the GST back to its previous 7% as a ploy to tackle the deficit. That move would’ve made the HST 15% in Ontario, instead of the 13% it is now. So thank God that didn’t happen.


So the bottom line on the HST is this. We’re not happy about it, but it’s here and it may cost you more – but it does not add to the cost of your resale home. At the end of the day, this new certainty is most definitely better faced than feared.