The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new "harmonized" total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.

The HST will result in a 13% tax on new home construction.
First, the good news....there is no HST tax payable on the sale of a resale home (residential). So the single largest dollar amount exchanged is not taxable under HST.

However, under the harmonized sales tax (HST), home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.

In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay - currently there is only the 5% percent GST payable on this fee. Your lawyer's fee will also be subject to the 13% percent HST, as will the cost of a Condominium Status Certificate.
If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for "high-ratio" mortgages has traditionally been taxable for PST - this amount will now be taxable for the full 13% percent HST.

So one can see that, with the introduction of the HST, whether you are buying or selling a Resale Home in Ontario, costs will be going up.

A press release from the Ontario Real Estate Association earlier this year summarized some of these changes which will take place - the example that they used was for a resale house priced at $360,000, and it was determined that the HST would add over two thousand dollars in new taxes to closing costs. Please note, these taxes are in addition to the Land Transfer Taxes which exist for both the Province and the City of Toronto. OREA calculated that, in total, the HST would add $313 million annually in new taxes to resale home transactions.

CURRENT TAXES PAID, VERSUS THE NEW COMBINED HST TAX PAYABLE, ON A HYPOTHETICAL $360,000 REAL ESTATE TRANSACTION:

Current Tax | New Tax | Total HST Payable
Mortgage Insurance Premiums(1) $752.40 | $470.25(2) | $1222.65
Legal Costs $50.00 | $80.00 | $130.00
Real Estate Commission(3) $900.00 | $1,440.00 | $2,340.00
Home Inpection $20.00 | $32.00 | $52.00
Title Insurance $24.00 | $15.00 | $39.00
Total New Tax: $2,037.25

(1) CMHC premium of 2.75% for mortgage with a 5% down payment on a $300,000+ home.
(2) Consumers currently pay the 8% PST on mortgage insurance premiums.
(3) Real estate commissions are negotiable - 5% used in this example.
(4) Ministry of Finance, Public Accounts, 2007/2008.
(5) Altus Group, "Economic Impact of MLS(R) Home Sales," June 12, 2007.
The HST Ontario Tax will add to the cost of buying and selling a resale home. Many market watchers are predicting a flurry of activity leading up to the July 1, 2010 implementation date, as buyers and sellers both try to avoid paying the tax.

To learn more or to find out how this will effect you personally, give Domenic Manchisi to recieve more details! 905-875-4594, domenic@domenicmanchisi.com

New HST for Ontario & BC Home Buyers

Effective July 1, 2010

What is the Harmonized Sales Tax (HST)?

Starting July 1, 2010, subject to legislative approval, the provincial sales taxes in Ontario and British Columbia would be replaced by a value-added tax structure and combined with the federal Goods and Services Tax (GST) to create a single, federally administered Harmonized Sales Tax (HST). The HST would be applied on most supplies of property and services made in those provinces at a blended rate of 13% in Ontario and 12% in British Columbia. With some exceptions, the HST would apply to the same base of property and services as the GST.

What property and services are exempt from the HST?

Examples of exempt property and services (related to real estate) include:

• Used residential housing
• Long term, residential accommodation (of one month or more), and residential condominium fees

How does the HST apply to new home purchases transactions that straddle the implementation date?

Generally, the HST would be charged on a purchase where payment is made or becomes due after April 2010 but delivery of the goods or services is made on or after July 1, 2010.

Special transitional rules would apply for real property sales and other transactions that occur during a period that includes the implementation date of July 1, 2010.

Transition Rules regarding Real Estate

• Where ownership or possession of the new home is transferred before July 1, 2010 under a written agreement, the provincial portion (8% in Ontario / 7% in BC) does not apply.
• Homes which were sold on or before June 18, 2009 under written agreements of purchase and sale will be grandparented. Effectively, such grandparented homes will not be subject to the provincial portion of the single sales tax where both ownership and possession of the grandparented home is transferred after June 30, 2010.
• Home purchasers of newly constructed or substantially renovated homes will be subject to the single sales tax where both ownership and possession of the home are transferred after June 30, 2010.
• After June 30, 2010, a transitional rebate will be available for non-grandparented single homes purchased by individuals or for builders who first rent the home. Individuals purchasing these new homes will have the option of obtaining the RST transitional rebate through the builder or by filing an application directly with the CRA. Individuals filing their own rebate will have to obtain the new home’s percentage of completion certificate from the builder.

Will there be a provincial homebuyer rebate for new home buyers?

Ontario and BC will both provide rebates (administered federally) for new housing purchased as a primary residence. The housing rebates will ensure that new homes purchased as primary residences across all price ranges would qualify for a rebate of up to $24,000 in Ontario and $26,250 in BC, while continuing to ensure that, on average, new homes priced up to $400,000 in Ontario and $525,000 in BC would not be subject to additional tax compared to the retail sales tax (RST) currently embedded in the price of new homes.

For more information, visit these websites:         http://www.gov.bc.ca/hst/faq.html

                                                                        http://www.cra-arc.gc.ca/gncy/hrmnztn/on/menu-eng.html

                                                                        http://www.rev.gov.on.ca/en/notices/hst/02.html

                                                                        http://www.grantthornton.ca/resources/insights/articles

The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.

"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

• Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
• Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
• Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.

The following article was released from Ottawa discussing the potential Real Estate bubble we may incur next year which will deffinately effect our housing market here in Milton. Those who are on the fence about purchasing a home should lock in their interest rates now. Good news for those who wish to sell as a forcasting 15-35% increase isn’t bad. Looks like the housing market for 2010 is on it’s way back up here in Milton!

OTTAWA — The federal government is ready to clamp down further on mortgage rules if the boom in the Canadian housing market turns into a bubble, says Finance Minister Jim Flaherty.

In an exclusive interview with Canwest News Service and Global National, Mr. Flaherty said the government is closely monitoring the red-hot housing market for signs that it is reaching “irrational” levels.
 
“The reality is we have low mortgage rates . . . so we can expect some upward pressure on housing,” he said. “That’s OK, as long as it doesn’t become a bubble. We’re watching that.”
 
If necessary, the government is prepared to further tighten the conditions under which the Canada Mortgage Housing Corporation insures mortgages, the finance minister said.
 
In July 2008, amid the fallout from the subprime mortgage crisis in the United States, the Finance Department announced that CMHC would shorten the maximum amortization period that it will accept to 35 years from 40, as well as require a down payment of at least 5% of the value of the home. The new rules, which came into effect in October 2008, effectively made it more difficult for prospective homeowners to receive government-backed mortgages.
 
“If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments,” said Mr. Flaherty.
 
His remarks come as some leading private-sector economists warn that the housing market might be getting ahead of itself amid a relatively modest recovery. In a recent report, Bay Street economist David Rosenberg estimated that housing prices are overvalued by as much as 15 to 35%. This week, the Canadian Real Estate Association reported that sales of existing homes spiked 73% year-over-year in November, while the national average sale price rose 19%.
 
“If being 15% to 35% overvalued isn’t a bubble, then it’s the next closest thing,” said Mr. Rosenberg, chief economist for investment firm Gluskin Sheff.
 
In recent weeks, Bank of Canada governor Mark Carney has expressed concern about the amount of debt that Canadian households have been racking up since the central bank cut its benchmark lending rate to near zero. Mr. Flaherty also wants to remind Canadians that the easy money won’t last forever.
 
“Interest rates are at historic lows. They are naturally going to go up,” said Mr. Flaherty. “People have to make sure that the mortgage on their home that they’ve put on today will be affordable at higher interest rates in the future.”
 
The discussion of a potential housing bubble shows how much the economic climate has improved since the end of 2008, when it was still unclear how the world would pull out of the global financial crisis.
 
Looking back, Mr. Flaherty said the turning point was a meeting of the G7 finance ministers and central bankers in October 2008, where, after “a lot of finger-pointing by the Europeans at the Americans,” they agreed to backstop the world’s financial system.
 
“We were in a situation, where the markets might not open on Monday, where banks were failing in Germany, in the United Kingdom, in the United States,” the finance minister recalled. “It was quite scary,”
 
In January’s federal budget, Mr. Flaherty announced the government would pump $61-billion in public funds into the economy over two years, the biggest stimulus package in Canadian history.
 
Mr. Flaherty once again predicted that next year’s budget will consist largely of the second year of the stimulus plan.
 
“Some of the stimulus items can be tweaked, certainly, but Canadians ought not to expect any major new spending programs,” he said. “It may be kind of a boring budget, but boring is just fine in 2010.”
 
The Conservatives have repeatedly promised not to raise taxes or cut transfers to the provinces or individuals to eliminate the deficit, which is projected to hit $56-billion this fiscal year. Instead, the government plans to rely on economic growth and possibly spending restraint to make up the shortfall.
 
In a recent editorial, however, two former senior Finance officials, C. Scott Clark and Peter Devries, wrote that “any credible budget will have to include tax increases.”
 
Mr. Flaherty disagrees. “The easiest thing in the world to do is raise taxes. What it does mean is you don’t have to have discipline in government spending. And Canadians know that there’s wasted government spending — some degree of it.”

The strength of housing clearly defied the weakened fiscal foundation throughout the year. Pent-up demand was the main driver of activity in 2009, given the thousands of purchasers who waited it out on the sidelines in 2008. Interest rates have been another principle factor, providing impetus at all price points. Consumer confidence buoyed sales as positive economic indicators—however sporadic—made their way into the headlines. Rising prices have also served as a catalyst, as it became evident that there were no deals to be had, despite the current economic uncertainty.

Although the global recession had little lasting impact on Greater Toronto’s housing market in 2009, the economic recovery is expected to bolster resale housing going forward. Overall, the GTA is expected to see housing sales reach 85,000 units, an increase of 14 per cent over 2008. Average price may break the $400,000 mark by year end or hover slightly below that significant milestone.

Given that the GTA boasts 40 per cent of the nation’s business headquarters, almost one-fifth of the country’s gross domestic product, nearly half of Ontario’s GDP, and 40 per cent of all immigrants, any improvement from an economic standpoint is bound to be felt at the consumer level. Supporting growth in 2010 will be a strengthened automotive sector, improved exports and commodity prices, greater retail and consumer spending, and a significant investment in capital projects. The implementation of the Harmonized Sales Tax (HST) in Ontario is expected to cause a run up in housing activity during the spring market, as purchasers move to avoid additional expenses. In the longer-term, new construction is expected to be impacted much more extensively, shifting some buyer demand to the resale sector—at least until buyers adjust to the new normal.

Inventory levels in Greater Toronto are expected to remain quite low, although some improvement will occur in the first half of 2010. Multiple offers will remain a factor, most evident on well-priced, well-located product, listed from $300,000 to $700,000. Hot pockets will continue to elicit bidding wars next year. The phenomenon will not be limited to single-family homes, as desirable starter condominium units in prime locations will also experience competition in 2010. Of all types of product, the upper-end—priced over $1 million—is expected to record yet another year of strong activity. Given the momentum that currently exists and the fact that all segments are now working in tandem, further increases in sales and average prices are forecast for 2010. Seller’s market conditions will continue to prevail, with condominiums and single-family homes predicted to experience a four per cent rise in prices in 2010, bringing average price to $415,000, while unit sales continue to edge higher, amid more favourable economic conditions, reaching 86,000 units.

For information on how to obtain a qualified mortgage professional call Domenic Manchisi at 905-875-4594 or email to Domenic@DomenicManchisi.com.

Call Domenic Manchisi for more information or a free no obligation consultation on how to obtain your report and how to make sense of it! 905-875-4594 or Domenic@DomenicManchisi.com

1.     People who look for a home during the holidays are more serious buyers

2.     Serious buyers have fewer houses to choose from during the holidays, so you have less competition

3.     Houses “show better” when decorated for the holidays

4.     Buyers are more emotional during the holidays

5.     Buyers have more time to look for a home during the holidays

6.     Many people want to buy before the end of the year for tax reasons

7.     January is traditionally the month for transfers. Transferees can’t wait until Spring to buy. You must be on the market to capture that market.

8.     You may still restrict showings during your personal family events

9.     You can sell now, but specify a delayed closing or extended occupancy until early next year if you desire

10.   By selling now you have an opportunity to buy during the Spring, when many houses are on the market

Bottom Line?

By listing now, you may have fewer actual showings, but more qualified and motivated buyers.

The Reason.

          You have less competition, resulting in a quicker

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability.  Even though interest rates have gone up in the last six months, they are still near historic lows.  Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life.  It’s important to live in a home that reflects your taste and values, yet is within your financial “comfort zone.”  To that end, it may be more important to lock in today’s relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today’s market.