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Province’s foot dragging led to uncertainty

Deb Abbey
Van. Courier

Every sector of the economy needs certainty to function efficiently and real estate is no exception. The recent HST debacle has affected real estate more than any other sector. Our homes are, quite simply, the single biggest purchase that many of us will ever make.

Housing affordability is a huge issue in Vancouver. After the HST referendum, the government promised to revert back to the GST and PST within 18 months but has subsequently dragged its heels over implementation.

That uncertainty about how the provincial government would transition from HST back to GST and PST has affected the market for new condominiums and houses for several months. To be clear, the HST does not apply to resale housing.

As a result, buyers have been playing wait and see or simply not looking at any newly built houses or condos. That has prompted many local builders and developers to eat the tax and many buyers to wonder whether they were being baffle-gabbed and still paying the tax one way or another.

None of this has been good for new construction in B.C. and the government has finally responded with transitional rules that will even the playing field between April 1, 2012 and April 1, 2013, after which, no PST will be charged on new housing in BC.

Here is how it’s going to work. For completion dates between now and April 1, 2012, the current HST with the current rebates will be in effect.

Naturally, anyone about to buy will want their completion date to be on or after April 2, which is a Monday.

For sales of new homes completed between April 1, 2012 and April 1, 2013, the transitional rules will apply. GST and PST will be charged but the new housing rebate will be available for homes with a value of $850,000 or less up to a maximum rebate of $42,500. That’s up from the previous threshold of $525,000 with a maximum rebate of $26,250.

The new rebates will apply to 90 per cent of new housing in B.C. The upshot is that you’ll pay the usual GST plus PST of two per cent after the rebate.

Why two per cent? Because prior to the HST, purchasers did not pay PST on new construction, but the builder paid PST on the materials to build the home. It’s estimated that that added up to approximately two per cent of the cost of a new home. After April 1, 2013, builders will once again pay seven per cent PST on their building materials.

The transition rebate will also apply to secondary, vacation or recreational homes outside of Vancouver and the Capital regional districts as well, giving a much-needed boost to workers and communities in recreational areas in B.C.

This is all good news for buyers in B.C. The HST rebate was useless for many first-time buyers purchasing newly built houses or condos in Greater Vancouver. And it just wasn’t fair when the B.C. government was and still is taking a piece of the action on every single real estate transaction in the province through the property transfer tax (PTT). (There are some exemptions for first time homebuyers.)

The tax is one per cent on the first $200,000 and two per cent on the balance every time you buy a new home. If the same house is sold 10 times in 10 years, the government collects PTT on each sale.

The B.C. Real Estate Association [BCREA] has recommended that they increase the one per cent PTT threshold from $200,000 to $525,000 with two percent on the remainder of the fair market value. Better still, they’d like to see that indexed to Statistics Canada’s New Housing Price Index and adjusted annually. Sounds good to me. Now that he’s sorted out the HST, Minister of Finance Kevin Falcon can work on fairer implementation of the PTT.

Check out these links for more details on the new tax programs: pstinbc.ca/media/2012_housing_rules_ FEB.pdf and pstinbc.ca/ buying_goods/buying_a_ home/new_home_tax_calculator

Deb Abbey is a real estate agent at Royal LePage City Centre in Vancouver. She is the author of two best-selling books on Sustainable Investment. You can contact Abbey through her website or email any questions or comments to [email protected].

© Copyright (c) Vancouver Courier

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JOSH BARBANEL
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The most expensive apartment in New York has passed from the hands of a retired American banker to the family of a Russian billionaire, setting some new milestones in the Manhattan real-estate market.

The sale for a penthouse with a wraparound terrace at 15 Central Park West owned by Sanford I. Weill, the former head of Citigroup Inc., closed on Wednesday, brokers said.

The price paid, as expected, was $88 million, 66% above that the previous record sale.

The purchase was made in the name of a trust for Ekatarina Rybolovleva, a 22-year-old college student and daughter of Dmitry Rybolovlev, a Russian now based in Monaco who made a fortune in potash fertilizer.

Hall F. Willkie, the president of Brown Harris Stevens, confirmed that the sale had closed at the full asking price. He said that he understood that the buyers would keep the custom-designed space as is, including an oval bedroom, and a study paneled in Brazilian rosewood.

The sale generated close to $2.5 million in city and state taxes, and produced what brokers said was a record commission on a residential sale of about $3.5 million for two brokers at Mr. Willkie’s firm. Kyle W. Blackmon represented Mr. Weill, while Maria Torresy represented the Rybolovlevs, brokers said.

The marquee sale shows the growing footprint of international buyers in New York in the past few years. Many of the units at One57, a new 1,004-foot tower under construction on West 57th Street, have gone to Russian and Chinese buyers, brokers said.

The previous record residential sale in Manhattan was the 2006 purchase of a townhouse on East 75th Street by J. Christopher Flowers, a private-equity investor. The largest condo deal was the $51.5 million purchase of a series of apartments at the Plaza Hotel by developer Harry Macklowe in 2007.

Mr. Weill has said he planned to donate the proceeds of the sale to charity, likely to one of a number of groups he already supports. A spokesman for Mr. Weill didn’t return a call requesting comment.

 

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The BC Budget announced today contains pleasant surprises for first-time buyers who purchase newly built homes, and for seniors who make renovations to help them live independently.

Both initiatives echo other recent announcements that help out people trying to get into the BC real estate market and those who want to stay in their homes as long as possible.

This week’s HST transition announcement raised the sales-tax exemption level on a newly built home to $850,000 from $525,000, which is more in line with the record-high real estate prices in the Lower Mainland.

And the new Home Adaptations for Independence (HAFI) program provides financial assistance of up to $20,000 for renovations such as handrails and grab bars that help seniors live as independently.

Now those programs combine with these new tax credits:

B.C. First-Time New Home Buyers’ Bonus

The new B.C. First-Time New Home Buyers’ Bonus will be a temporary, one-time refundable income tax credit for first-time home buyers who purchase a newly constructed home. The credit will be calculated as five per cent of the purchase price of the home, up to a maximum credit of $10,000.

The credit will be phased out at a rate of 20 per cent of net income in excess of $150,000 for single individuals and at a rate of 10 per cent of family net income in excess of $150,000 for couples. Only one credit can be claimed per home.

The credit will be available on purchases of newly constructed housing where both the HST applies and where a written agreement of purchase and sale is entered-into on or after February 21, 2012.

Click here for details.

B.C. Seniors’ Home Renovation Tax Credit

The B.C. Seniors’ Home Renovation Tax Credit will be a new refundable personal income tax credit to assist with the cost of permanent home renovations that provide individuals age 65 and over with increased independence, allowing them the flexibility to remain in their own homes longer.

The maximum credit will be $1,000 annually, calculated as 10 per cent of eligible expenditures. The credit will be available to individuals who incur eligible expenditures on or after April 1, 2012. The credit can be claimed by seniors, whether they own their home or rent, and by individuals who share a home with a senior relative.

Homebuilders See “Mixed News” in Budget

B.C.’s just-released budget is a mixed bag for B.C.’s construction industry, according to the Greater Vancouver Home Builders’ Association (GVHBA).

“We were hoping that there would be some measures in the budget that would address the HST on home renovations; there was none,” said Peter Simpson, GVHBA president and CEO.

“So we’re still left with challenges with the underground economy and with people sitting on their wallets, delaying their decisions to do home renovations.”

However, Simpson commended the government for the Seniors’ Home Renovation Tax Credit of up to $1,000 and the tax credit of up to $10,000 in the First-Time New Home Buyers’ Bonus.

The latter move, he said, not only allows first-time homebuyers “that typically have to use the bank of Mom and Dad” to get into an expensive real estate market — but also means a boost for the construction industry.

“[Tying it to] newly built homes spurs construction jobs,” he said, commenting that each new housing start creates three person-years of employment.

Simpson said the Seniors’ Home Renovation Tax Credit and the First-Time New Home Buyers’ Bonus, together with last week’s announcement of PST-transition rules that are geared at encouraging home buyers back into he market before the transition, are likely to boost B.C.’s construction activity.

“It’s sure not going to hurt,” he said.

© 2011 REW. All rights reserved.

Government announces new HST/PST housing transitional rules

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