[cdr108]

Absolutely correct.

In Toronto, a $600000 home is usually not for the rich. $600000 homes are for middle-income families. The rich prefer to live in homes north of $1 million.

WOW, I didn't know the average Toronto middle-income family earned $150-200K annually to support a $600,000 home.

And to think the last StatsCan census had it listed at ~$70,000 for Toronto.

If anyone gets the chance to read an affordability report and not just read the news headlines, look at the footnotes.

You will find that they consider the average condo to be 900 SF, and house a detached bungalow of 1200-1300 SF.

 

[Eug]

WOW, I didn't know the average Toronto middle-income family earned $150-200K annually to support a $600,000 home.

And to think the last StatsCan census had it listed at ~$70,000 for Toronto.

If anyone gets the chance to read an affordability report and not just read the news headlines, look at the footnotes.

You will find that they consider the average condo to be 900 SF, and house a detached bungalow of 1200-1300 SF.

First off we're not talking about just condos. We're talking about houses too. Second I am not limiting myself to "average". However, at the upper end of middle such homes are quite common, and are more the norm than the exception assuming you're not willing to accept some run down place in a rough neighbourhood or way outside the core of the city. That's partially why it's still common to see larger nice condos over $400000. You'll also note that article is talking about "upwardly mobile" middle income families. These are people who already have significant equity in their homes, which they can use to upgrade. (They give the example of the family wanting the extra bedroom.) However these crazy new taxes are going to hit them very hard. This will essentially exclude newly built houses as a choice. Development of new homes in this category is going to be hit hard.

Also, now some of it may be perspective, but what many may consider "rich" by Toronto standards are way above this $150000-per-family category.

 

[Hydrogen]

WOW, I didn't know the average Toronto middle-income family earned $150-200K annually to support a $600,000 home.

And to think the last StatsCan census had it listed at ~$70,000 for Toronto.

If anyone gets the chance to read an affordability report and not just read the news headlines, look at the footnotes.

You will find that they consider the average condo to be 900 SF, and house a detached bungalow of 1200-1300 SF.

Two earners making in the neighbourhood of $65,000 to $75,000 and having saved up for a down payment can afford a $500,000 to $600,000 home easily.

The presumption that only wealthy people can afford a property at such a price is wrong. In fact, this tax will greatly affect the effort to encourage families to move downtown. That is not good.

 

[AKS]

Is the average income 65-75k? I thought I read the average income is 40k. So 2 people earning 40k average earns 80k. After taxes would be less. It would take 10 yrs or so to pay off 500k.

 

[Automation Gallery]

Harmonized tax will hit housing hard, builders say

Ontario Premier Dalton McGuinty and Finance Minister Dwight Duncan may wake up one morning a few years from now and have one of those "What was I thinking?" moments.

They will look out of their Queen's Park windows and see a Toronto changed for the worse. Two-bedroom and larger condominiums will be significantly less affordable and the Greater Toronto Area's supply of family-sized rental apartment suites will be sinking faster than the Titanic.

The GTA will be turning into a metropolis of small one-bedroom and one-bedroom and den suites. Only the rich will enjoy condos more than 800 square feet in size and even they will be looking at paying a premium of at least 6 per cent more than today's prices — before factoring in any rise in construction costs.

That is how the building industry sees the future of the GTA if the province goes ahead with its plans to combine the 8-per-cent provincial sales tax and the 5-per-cent federal goods and services tax on July 1, 2010.

The rest of it from the todays Globe.
http://www.theglobeandmail.com/serv.../BNStory/RealEstate/home?cid=al_gam_mostemail

 

[Johnzz]

Has it been confirmed whether a condo purchased before July 1st, 2010 but built after this date, will be subject to the new HST?

 

[nfitz]

In Toronto, a $600000 home is usually not for the rich. $600000 homes are for middle-income families. The rich prefer to live in homes north of $1 million.

But are the taxes going to be that significant on a $600,000 home? The full extra 8% of the HST will only kick in on the last $100,000, with a lesser amount on the preceding $100,000. Meanwhile, the 2% or so that they estimate the current PST impacts the house cost, will be removed from the entire $600,000. At those rates, a $600,000 should still cost a bit less with the new tax than it does now.

 

[Hank]

As far as I'm aware, all homes will pay the full 13% HST on the entire amount, it's just that homes under $400,000 will essentially get a refund of 6% of the HST while homes between $400,000 and $500,000 will get a progressively smaller refund until, at $500,000, there is no refund. The effect of this is that a $600,000 home will pay HST on the entire amount, not just on the last $100,000 (or $200,000).

Homes should theoretically, however, get a 2% discount (the estimated value of the former PST paid on building supplies that builders will now be able to claim a credit for), so a $600,000 home that would have sold for $630,000 before ($600,000 + $30,000 GST) will now cost $664,440 ($600,000 - 2% + 13%), or $34,440 extra.

 

[Eug]

But are the taxes going to be that significant on a $600,000 home? The full extra 8% of the HST will only kick in on the last $100,000, with a lesser amount on the preceding $100,000. Meanwhile, the 2% or so that they estimate the current PST impacts the house cost, will be removed from the entire $600,000. At those rates, a $600,000 should still cost a bit less with the new tax than it does now.

You'd think that'd be the case, but as Hank says, that's not how it works. For some idiotic reason, a house costing $600000 requires payment of 100% of the tax on all $600000, whereas there is no (net) tax at all on homes below $400000.

 

[AKS]

I heard on the chinese radio the builders are finding a way around the issue by selling "white" boxes. Basically, the builder sells you a bare bones house for under 400k and you'll have to do the rest yourself. It might end up being a good thing maybe since you can pick which contractor you want to deal with and monitor the progress. It might even end up cheaper and you can do all sorts of upgrades without paying the spiked up upgrade fees charged by the builder.

 

[Monaco]

I heard on the chinese radio the builders are finding a way around the issue by selling "white" boxes.

If you don't understand Chinese, here's a link to an article talking about this "white box" issue.

 

[Eug]

If you don't understand Chinese, here's a link to an article talking about this "white box" issue.

Heh. That was quick. I knew they'd be creative.

Good for the developers. As implemented, this HST is stupid. The way it's been done is completely unfair for new home buyers, esp. in the GTA where homes above $500000 are quite common.

 

[GraphicMatt]

Setting the cap at $400K across Ontario is a ridiculously short-sighted move by Queen's Park. I get that the idea is to tax those buying 'luxury homes' more, but drawing the line uniformly across the province is the wrong way to go about things.

I'd like to see the current exemption limits replaced with a formula derived from the average selling price of a house in the area.

 

[Eug]

Setting the cap at $400K across Ontario is a ridiculously short-sighted move by Queen's Park. I get that the idea is to tax those buying 'luxury homes' more, but drawing the line uniformly across the province is the wrong way to go about things.

I'd like to see the current exemption limits replaced with a formula derived from the average selling price of a house in the area.

The $400000 (to $500000) cut off seems reasonable, but it should apply to ALL new homes. ie. Something like: If a house is $400000 it is exempt. If it is $1400000, the first $400000 is exempt. Taxes would be calculated on ($900000 to) $1000000.

 

[afransen]

I heard on the chinese radio the builders are finding a way around the issue by selling "white" boxes. Basically, the builder sells you a bare bones house for under 400k and you'll have to do the rest yourself. It might end up being a good thing maybe since you can pick which contractor you want to deal with and monitor the progress. It might even end up cheaper and you can do all sorts of upgrades without paying the spiked up upgrade fees charged by the builder.

You can only evade the taxes on the first $400,000. Any additional investments in the home, whether material or in services, is taxable by HST (except home production, of course). Of course, to avoid $32,000 in taxes, it may just be worthwhile. It's a no-brainer that they will have to exempt the first $400,000 of any new home. By phasing it back in, they make the marginal effective tax much, much higher, which of course gives a strong incentive for avoidance.