HST on New Homes – Changes to Rebate Threshold

On July 23, 2009 the government of BC announced that it intends to harmonize the Social Service Tax (“PST”) with the federal Goods and Services Tax (“GST”) effective July 1, 2010.  The Harmonized Sales Tax (“HST”) will combine a 7% BC rate (“provincial portion”) with the 5% federal GST for a combined 12% HST. On November 20, 2009 the government of BC announced some changes to the thresholds for the rebate of the provincial portion of the tax as it applies to new home sales.

Under the proposed HST, new home sales will be subject to the full HST.  However a partial rebate of the provincial portion of the HST for new homes will be available.  The new housing rebate will be 71.43% of the provincial portion of HST paid up to a maximum of $26,250.  The rebate will be available regardless of the price of the new house or whether or not the new housing is to be owner occupied or rented.  Houses valued at $525,000 or more will therefore be entitled to the maximum $26,250 rebate.

Example 1

New home, $300,000 purchase price.  HST paid would be 12%, or $36,000.  The provincial portion of the $36,000 would be $21,000 and the rebate on the provincial portion would be 71.43% of $21,000, or $15,000.  So, the net HST charge would be $21,000 ($36,000 gross HST less $15,000 rebate).

Shortcut – for new homes under $525,000, the net HST after rebates equals 7%. ($300,000 * 7% is $21,000)

Example 2

New home, $600,000 purchase price.  HST paid would be 12%, or $72,000.  The provincial portion of the $72,000 would be $42,000 and the rebate on the provincial portion would be 71.43% of $42,000, or $30,000.  However, the max provincial rebate is $26,250 so, the net HST charge would be $45,750.

Shortcut – for new homes over $525,000, you calculate the 12% tax and just subtract $26,250

One other change announced recently is that harmonized tax will not be levied against pre-sale homes for which the buyer signed a purchase contract prior to Nov. 18.  Previously, the tax was to apply to new homes for which buyers took possession after July 1, 2010, so this provides relief for purchasers who have already purchased pre-sales.

Should You Renovate Before You Sell?

Does your home and current market conditions warrant a home renovation before you sell? Here are some things to consider before you start that large reno job.

Every day a homeowner asks the question, "should we renovate and sell or sell this home as it is?" And every day a homeowner gets the renovation bug and spends thousands of dollars on their aging home only to find that they really made no profit on the work after selling.
Do-it-yourself and home renovation is an extremely enormous market. And with all the inspiring shows we see on television each day, it is hard not to get the bug!

Absolutely everything we need is available at the local hardware outlet - some of them even offer free reno classes. All that is missing is experience. The experience required to select professional materials and not just buying what is presented in the sale catalogue; the experience to handle the difficulties of the job, to prepare the many different types of surfaces that people are confronted with, and the experience to know what can and cannot be achieved without specialized tools or without time to cure products or allow them to settle so that inherent problems do not affect how the finish performs over time.

So what do you do if selling the home is intentional and a profit essential? You need to do a serious market survey and compare your home with what is in your street and area and what they had that you don’t. If you are the best home in your street, then you have already hit the top of your market and it will be hard to predict what you will get. In this situation you need to find a buyer who is simply as passionate about your home as you are, and hope that an emotional bid may allow your home to hold the new highest street price as a future comparative yard stick for others.

At the same time, a professional finish can be achieved with a very minor budget. It would be very worth bringing in a professional painter and painting the home in soft colours that provide a warm or cool contrast but do not dominate the colours within your rooms. Another low budget recommendation is to invest your budget in hiring new, fresh furniture for the auction or sale period, so that the furnishings are not tired and worn and can actually modernize the feel of the home.
In closing, your best bet is to have a serious chat with agents or the right people for advice on what is an acceptable limit for your renovation work given the area you live in. Remember, everyone out there wants to purchase a bargain. Why not give your next buyer a home worth renovating! It might be just the thing that attracts them to it.
(Source: hgtv.ca)

Bank of Canada Holds Steady on Rates

The Bank of Canada kept its benchmark lending rate at 0.25 per cent in its December rate announcement, reiterating its conditional commitment to hold rates steady until the middle of 2010.

"While significant fragilities remain, global economic developments have been slightly more positive and the global outlook has improved modestly," the bank said in announcing the rate decision.

Although recent data on GDP and inflation have diverged somewhat from projections, "the main drivers and the profile of the projected recovery in Canada remain consistent with the bank's views," the bank said.

The Canadian economy grew by a tepid 0.1 per cent in the third quarter, Statistics Canada reported earlier this month.

Canada's central bank expects economic growth to become more solidly entrenched throughout 2010 and inflation to return to the two per cent target in the second half of 2011.

RBC economist Dawn Desjardins expects the central bank will raise rates by a full percentage point in the latter half of 2010, once it is more confident that the recovery is underway.

(source: CBC.ca)

Select Mortgage at the Festival of Trees

Every year, the Festival of Trees transforms The Fairmont Empress in Victoria into a lush forest of beautifully decorated trees to raise funds for BC Children's Hospital.  Local businesses, organizations and individuals decorate the trees in a sometimes wacky, often irreverent, and always beautiful fashion. The trees are on display through to January 3, 2010.  The Select Mortgage staff have decorated a tree again this year in support of this wonderful cause.  Please come down and vote for your favourite!