Apr 5 | Posted by Barry

The new HST comes into effect in July of this year. While my previous blog entry (see below) dealt with the impact of the new Harmonized Sales Tax (HST) on resale homes, many people have commented to me that the situation is far different on new homes. This is true!

In general terms, a “new” home is defined as a residence that has not been previously inhabited. A home that has been renovated typically would not be considered as a new home, given that there was a previous occupant. However, the degree of renovation (if substantial) may dictate that this home is classified as new from the standpoint of HST. 

If you are purchasing a home that is deemed to be a renovation, and represented as such by the vendor, it is important to ensure that this is in writing. You may also want to check with your attorneys to ensure that this representation is accurate from an HST standpoint.

While this issue may involve only a very small fraction of properties (ie: most homes sold are clearly “new” or “used”) an error here could be very costly. How costly? 13% of a $1 million property is $130,000.

We expect to see a surge in new home sales in May and June, as people, quite logically, move quickly to save on the HST. (Note, a new home currently will incur a 5% GST on sale, so the savings is not the full 13%, but only 8% … 'only' is said very lightly here!)

Nevertheless, if you are buying a resale home, where the sales tax is not an issue, I would still recommend avoiding a closing in late June, as the Registry offices, trust companies and attorneys are going to be exceptionally busy. Early July might be a safer bet.