The introduction of the Harmonized Sales Tax in both Ontario and British Columbia on July 1st 2010 has been widely cited by real estate professionals and analysts as one of the major factors affecting a slowdown in housing sales. This theory seems to be supported by a recent survey commissioned by the Ontario Real Estate Association (OREA) and conducted by Ipsos Reid, which shows that 56% of people in Ontario believe that the new HST applies to the cost of resale homes.

With the average resale home price sitting at $333,000 in Ontario, this means that many would expect to pay an additional $40,000 in sales tax if they bought a home at that value. The reality is that there is no HST collected on the full purchase price of a resale home. In fact the HST is only levied on the various transaction fees associated with the purchase of a home that has been previously occupied (i.e. not a newly-built home).

“Clearly, Ontarians still don’t know what the HST covers and what is exempt,” said OREA president Dorothy Mason. “This is not helping the housing market, and it’s not helping the Ontario economy. This confusion means that many buyers think the cost of a resale home is tens of thousands of dollars higher than it actually is.”

She added: “We’re doing our part to inform our clients, but we shouldn’t have to do it alone. We’re calling on the Ontario government to launch an immediate public awareness campaign to educate taxpayers and end the HST confusion. For average homebuyers, learning that the HST does not apply to the full purchase price means a $40,000 saving they weren’t expecting.”

Although there have been signs of improvements in the Canadian housing market recently, with the Canadian Real Estate Association reporting sales gains in both September and August, Real estate agents in Ontario are concerned that their business is being damaged by the  fear their business is being hurt largely by the mistaken belief that the HST applies to previously owned homes.

As this is a very important issue affecting the people of Ontario, I'd like to know how the HST has affected you since it's implementation.

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