Standoff Between Buyers and Sellers May be Ending

Positive signs the Fraser Valley housing market is starting to move

Last month I reported that it seemed the local market was ready to start moving again and all indications are that this is the case. Phone and email inquiries about listings are picking up, prices are relatively stable, therefore it appears that Buyers are now ready to enter the market, not wanting to miss out on their opportunity to buy a new home.

This movement is coming about due to a few factors such as the fewer number of listings available now, the stability of prices – many sellers have reduced as much as they are prepared to – and the continued low interest rates. Both FVREB President Ron Todson and BCREA chief economist Cameron Muir say that Buyers see the reduced inventory and stable prices as signs that it’s time to buy and get on with things.

Benchmark pricing for Surrey continues its slow and steady increase; for February 2013 the benchmark price for detached homes was $540,900, up 0.7% from February 2012, and up a slim 0.1% from $534,500 in January 2013 for another overall gain. Townhouse prices dropped by only 1.3% to $296,700 from $300,500 in February 2012, but gaining 1.0% from $293,700 in January 2013. Apartment/condo prices saw another increase, this time up 1.5% to $202,500 from $199,500 in February 2012, and up 1.0% from $200,400 this past January for an overall gain three months in a row. Average price for all property types in the Fraser Valley combined is down only 4.8% to $471,767 from $495,345 in February 2012, but increased 7.5% from $438,751 in January 2013. This trend of small changes, whether up or down, proves the relative stability of pricing in the market and allowing Buyers to see that this is a good time to buy.

We have less than a month left until British Columbia sees the end of the HST and returns to the PST + GST tax system. This means that the 2% Transition Tax begins on April 1st to make up for the difference between the HST and the GST, but it also means that the Enhanced New Housing Rebate program comes to an end. Under this program, buyers of a new home (new construction only) up to $850,000 are eligible for a one-time rebate of up to $42,500 on their purchase before April 1, 2013. That means the completion date may be no later than March 31, 2013. So if you’re considering buying a new home, new condo, or new townhouse in Surrey, this may be the sign you’ve been waiting for!

For more information and links about both the Transitional Tax and the Enhanced New Housing Rebate program please visit my website at surreyproperties.com/freemarketinfo.html for information about these programs and other tips for home buying.

One way to stay on top of the market in your area is to visit my website and sign up for the MLS Market Snapshot. You will immediately begin receiving information about the market in your neighbourhood – both active and sold listings with their sale prices – to help keep you up-to-date about home values in your area free of charge.

Buyers are Poised for Action!

For the last six months or so we’ve been watching the market as the news media kept asking if the bottom had dropped out, making potential buyers and sellers wary about getting in to the market. But the Fraser Valley isn’t the same as Vancouver, and we don’t experience the sharper price increases and decreases as in the Vancouver market.

Yes, buyers have been holding back, waiting to see how far sellers will let prices drop, but as we saw in January sellers aren’t desperate to sell. According to Scott Olson on the Fraser Valley Real Estate Board, “prices… have decreased by only two to three per cent in the last six months” (February 4, 2013).

So here we are; it seems that prices have dropped as far as vendors are willing to let them go, now it’s up to the buyers to make their move. Interest rates are still low, the Bank of Canada hasn’t even raised their rates, so if buyers wait too long, that new home may be snapped up or taken off the market!

Benchmark pricing continues to steadily gain; for January 2013 the benchmark price for detached homes was $540,500, up 1.5% from January 2012, and up a slim 0.3%  from $539,000 from December 2012 for an overall gain. Townhouse prices dropped by 2.0% to $293,700 from $299,800 in January 2012, and down only 0.9% from $296,400 in December 2012. Apartment/condo prices saw an increase of 1.2% to $200,400 from $198,000 in January 2012, and up 0.1% from $200,100 this past December, for another overall gain. Average price for all property types in the Fraser Valley combined is down 7.0% to $438,751 compared to $471,769 in January 2012, and down 4.3% from $458,517 in December 2012.

Last month I wished you a Happy New Year, but this month it’s time to wish you Gong Hey Fat Choy in celebration of 2013’s Chinese Lunar New Year. 2013 is the Year of the Snake, and calls for steady progress and attention to detail. And another Groundhog Day has come and gone, with two out of three weather-predicting rodents calling for an early spring around North America. My wife’s birthday is also Groundhog Day and I am please to report that she also did not see her shadow on Saturday morning. So with an early spring forecast and in the spirit of the Year of the Snake, it may be time to start thinking of looking around the outside of your home to see what updates, improvements, or repairs should be made before putting your house on the market. We’re already starting to trim the hedges and clean up the garden debris, ensuring our own attention to detail. And driving through the local neighbourhoods we’re starting to see more FOR SALE signs going up, another good indication that people are ready to make their move in 2013.

One way to stay on top of the market in your area is to visit my website and sign up for the MLS Market Snapshot. You will immediately begin receiving information about the market in your neighbourhood – both active and sold listings with their sale prices – to help keep you up-to-date about home values in your area free of charge.

Are you ready to buy or sell in 2013?

We all know that the market has slowed down and the latter half of 2012 was very much a waiting game. The relatively stable economic conditions in BC meant that sellers who didn’t need to sell right away simply took their homes off the market to wait for more buyers while the buyers waited to see if prices would continue to drop.

The mortgage changes have come into effect, BC is set to return to the GST and PST taxing structure, and the holiday season is over. The mood in the office is that everyone is ready to get back to the business of buying and selling. The demand is there, buyers are ready to buy, sellers are ready to get their properties listed, all the market needs is for someone to start the process.

According to the monthly statistics package for December 2012 from the FVREB, the total number of sales for December 2012 for detached homes in Surrey is down 30.5% over December of 2011, and down 30.2% from this past November. Townhouse sales are down only 17.8% over December last year but down 27.1% over November, and apartment/condo sales are down 16.2% from December 2011 though down 26.9% from November of this year. For all property types in Surrey, the total number of sales overall is down 25.4% from December 2011, and down 26.6% from November of this year.  Given the factors involved, this is to be expected given that the number of listings were also down 22.9% compared to December 2011 and down 49.3% from this past November.

Benchmark pricing continues to steadily gain; for December 2012 the benchmark price for detached homes was $539,000, up 1.2% from December 2011, but down slightly by 1.0%  from $544,700 from this past November for a net gain of 0.2%. Townhouse prices dropped by 2.2% to $296,400 from $303,00 in December 2011, and down only 0.8% from $298,800 in November 2012. Apartment/condo prices saw an increase of 1.6% to $200,100 from $196,900 in December 2011, but down 1.3% from $202,800 this past November, leaving a net gain of 0.3%. Average price for all property types in the Fraser Valley combined is down 9.5% to $458,517 compared to $506,393 in December 2011, but up 3.7% from $442,203 in November 2012.

So with the holidays behind us and a few more months of wintery, rainy weather to go, this is a good time to look around your home and see what you can do to warm it up a bit. If you’re the type to make New Year’s resolutions, perhaps one was to get more organized; have a look around the basement and garage, see what needs a push out to the recycling bin or to the thrift shop. Clean out that junk drawer in the kitchen – we all have one, mine has old cereal-box prizes, fishing lures, and dried-out Sharpie markers. Or maybe the kitchen needs some new paint to bring in more light on these dark winter mornings. Just a little freshening up, removing one or two knick-knacks, or some new bathroom towels can change the whole mood of a room. Give it a try!

One way to stay on top of the market in your area is to visit my website and sign up for the MLS Market Snapshot. You will immediately begin receiving information about the market in your neighbourhood to help keep you up-to-date about home values in your area free of charge. I hope the New Year is happy one for you and your family.

Housing Prices Stabilizing

The slower start to housing sales this fall combined with the recent changes at the federal level to mortgage rules means that the lower mainland is now in a market correction phase. Buyers are still attracted to other lower-priced options with the availability of new townhomes and apartments close to transit and city services while offering generous floor plans and private amenities. And resale townhomes and apartments offer even more attractive pricing with established strata councils and well-maintained amenities.

Scott Olson, president of the Fraser Valley Real Estate Board, reports that despite the drop in inventory of both detached and attached homes in October, there was a 23 per cent increase in the number sales over September. This shows that pricing is, in fact, beginning to balance out and offer greater stability in the market for sellers as well as for buyers.

According to the monthly statistics package for October 2012 from the FVREB, the total number of sales for October 2012 for detached homes in Surrey is down only 3.5% over October of 2011, but up 40.8% from this past September. Townhouse sales are down 7.9% over October last year and up 38.8% over September, but apartment/condo sales are down 24.4% from October 2011 though only down 3% from September of this year. For all property types in Surrey, the total number of sales overall is down 9.9% from September 2011, but up 30.2% from September of this year, indicating that we are approaching a period of stable pricing in the market.

However, benchmark pricing has continued its path of slow growth; for October 2012 the benchmark price for detached homes was $565,900, up 5.1% from October 2011, but a slight decrease of 0.3% for the second month in a row from $567,800 from this past September. Townhouse prices dropped by 1.8% to $297,000from $302,400 in September 2011, and down 1.9% from $302,700 in September 2012. Apartment/condo prices saw a drop of 2.3% to $192,400 from $196,900 in October 2011, and down 2.3% again from $197,000 this past September. Average price for all property types in the Fraser Valley combined is down only 0.8% to $472,239 compared to $476,261 in October 2011, and down 3.2% from $487,660 in September 2012.

It seems that the Fraser Valley is seeing this slower market and the decrease in average sale prices because buyers are still waiting for better incentives to buy. Despite the numerous rebates and tax incentives available especially for first-time and new-home buyers, the sticking point is still the listing price. Sellers are advised to consult their Realtor to look at the sales patterns and pricing in their neighbourhoods and determine what they can do to make their home more attractive to prospective buyers. At this point, buyers aren’t as motivated right now and if prices aren’t quite right for them they are inclined to wait until the prices reach a lower point.

We are now in the midst of the market correction that started earlier this year and prices have started to decrease. New home buyers are waiting a bit longer to make that first home purchase, but waiting in order to save more money for a down payment, or purchasing a condo or townhouse may offer that opportunity for home ownership and to build equity for “good” debt versus “bad” or retail consumer debt. Regardless, it confirms that the market has slowed down overall, but that there are still purchases and sales to be made. As at any time during the market cycle, it pays to shop around as there are good prices available and good properties out there.

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Source: Fraser Valley Real Estate Board. (2012). http://www.fvreb.bc.ca/statistics/Package%20201210.pdf

Home Buyer Quick Facts

I was updating some of the information in our Buyer’s Package and thought a quick round-up of information for Buyers would be timely seeing as how we’re experiencing a market correction in the Greater Vancouver and Fraser Valley markets and Buyers are able to be a bit more choosy in terms of properties they want to see and the price ranges they’re able to access. If you wish to have a hard copy of the topics covered in this post, click Home Buyer Quick Facts for a PDF copy.

The Down Payment

Lending institutions will require you to make a down payment or at least 5% to 10% of the purchase price of the home. The federal government has made recent changes to the Canadian Mortgage and Housing Corporation (CMHC) rules and amortization periods which are important to understand.

The Low Down Payment

If you are looking to purchase a home with only 10% as a down payment, you are able to do so. The loan is then insured by the CMHC for a premium of between 0.5% and 2.5%, and this premium can be added to the mortgage and paid along with your monthly mortgage payment.

If you have only 5% for a down payment, you must not have owned a home in the last five years. The CMHC insurance premium is then higher, from between 2.5% to 3% of the loan, and one of the changes to CMHC insurance rules is that in order to qualify for CMHC insurance, the total purchase price for a home with a high-ratio loan (loans with a loan-to-value percentage of 80% or higher) must not exceed $1,000,000.00.

The RRSP Home Buyers Plan

First-time home buyers may withdraw up to a maximum of $25,000 on a tax-free basis from their RRSP, and couples may withdraw up to $50,000. Taxpayers who have little or no money in their RRSPs may contribute to their own or to their spouse’s RRSP, wait 90 days, withdraw the funds, pay back the low-interest loan used to purchase the RRSPs, and then use those funds for their down payment.

Almost everyone who purchases a home borrows some of the money needed to pay for it. The easiest way to determine how much money you will be able to borrow is to consult with one or two lending institutions, or a mortgage broker, who will use certain criteria to determine how much money you can borrow.

As a Rule of Thumb…

Allow no more than 30% of your gross monthly income (before deductions) to make your monthly housing payments. This is generally referred to as the Gross Debt Service ratio (GDS). To determine your GDS simply add:

Your Gross Monthly Income
+Spouse’s Gross Monthly Income
+Other monthly income (e.g. rent, trust account)
Total Monthly Income

Total Monthly Income x 30% = Total Monthly Maximum Payment

If you have other monthly financial obligations, such as a car loan or credit card payments, you must add these to your total monthly maximum payment. This is your Total Debt Service Ratio and it must not exceed 40% of your gross monthly income.

With this information, many lenders will pre-qualify you for a specific size and type of mortgage loan before you begin searching for your new home. Taking the time to apply for a pre-approved mortgage will give you the security of knowing how much you can afford to spend.

CMHC Rules

The Canadian federal government announced last year that they would be changing some of the rules regarding Canadian mortgages in an effort to help Canadians reduce their household debt load and encourage building and maintaining equity in their homes (www.fin.gc.ca/n11/11-003-eng.asp). As of March 2011 the maximum amortization period for high-ratio loans (loan-to-value rate of 80% or higher) was lowered from 35 years to 30 years.

The second change affected homeowners looking to refinance their mortgages, reducing the maximum value that they can borrow from 90% to 85% of the value of their home. This is to ensure that homeowners retain greater value in their homes as an asset.

The third change was that as of April 2011 the federal government would no longer guarantee non-amortizing lines of credit where the home is used as security. That is, home equity loans or home equity lines of credit that do not require a monthly payment on the principal and interest will no longer be eligible for government-backed insurance. This does not mean that they are entirely ineligible for insurance, just that the CMHC will not be insuring these types of loans or lines of credit without scheduled principal and interest payments.

Mortgage Brokers

One of the best ways to borrow money at lower rates than those posted by major banks is by securing your financing through the services of a mortgage broker. When dealing with a bank you only have one lender, whereas mortgage brokers deal with multiple lenders at any given time – including banks – providing customers with a wider range of services and options.

Bank employees work on a salary basis and can only offer services provided by their own financial institution, while mortgage brokers work on a finder’s fee basis and can offer services and low rates from a variety of lenders. This, in turn, allows them to design a mortgage which best suits your needs and can often save you money.

Mortgage brokers have daily updates on mortgage rates and are able to easily set up your mortgage with an institution that has the lowest rate and/or the best options for a buyer.

Since a mortgage broker does a large-volume business with several institutions they often have access to lower interest rates and faster approvals for their clients.

It’s free. Mortgage brokers offer their services free to borrowers as their fee is paid by the investors and financial institutions that they work with.

Applying for a Mortgage

To process your mortgage application, the following information is usually required by the lender to process your application:

• Confirmation of employment – a letter from your employer(s) on their letterhead, indicating your position or job title, length of employment, gross income, etc.
• Confirmation of income – the front pages of your tax returns (or T4 slips) for the past two years, and one current pay stub. Written confirmation of other income being used as support (e.g. suite or rental income, spousal support, government pensions, etc.)
• Confirmation of down payment – photocopy of your bank statement, or a recent copy of an RRSP statement, or a gift letter indicating the down payment is a gift, or copy of the contract of sale for your present home plus a copy of the mortgage statement for that home
• If you are self-employed – statement of income and balance sheets for the past three years, Revenue Canada Assessments for the past three years, or your tax returns filed (T1 General) for the past three years
• Additional information – Social Insurance Numbers (SIN) for each borrower; address, telephone number, and contact information for confirmation of employment, and a cheque to pay the application fee

Closing Costs

It is easy to count your available cash as the entire amount you are able to spend on the purchase price of a new home, but you should not use all of this money as your down payment. There are other costs that you will need to consider and budget for in the purchase of a new home, referred to as the “closing” costs.

• Property Transfer Tax (PTT) – the provincial government imposes a property tax which must be paid before any property can be legally transferred to a new owner. The tax is 1% on the first $200,000 of the purchase price and 2% on the amount over $200,000.
• First-time Home-Buyer’s Exemption – Qualifying first-time buyers may be exempt from paying the PTT on homes priced up to $425,000. There is a proportional exemption for homes priced up to $450,000.
• Transitional HST/PST Rules for BC – BC returns to the PST + GST format for sales taxes on April 1, 2013 but there are rules governing the handling of HST versus GST during the transition period. If the ownership and possession transfer on or after April 1, 2013, HST will no longer be charged. If the property is a resale house, neither HST nor GST will be charged on the purchase price. If the property is a new home, a transition tax of 2% on the sale is calculated on the total negotiated sale price to be paid by the Buyer to the builder and paid on the date that the GST becomes payable (April 1, 2013).
• Property Tax – If the Sellers have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes. This is one of the costs that is calculated by your lawyer or notary public.
• Appraisal Fee – when your lending institution requires an appraisal of the property before approving your loan, it may be your responsibility to pay the appraiser’s fee.
• Survey Fee – The lending institution may also require that a survey certificate be presented to them. If the current owner cannot provide a recent survey certificate, it will be your responsibility to pay the surveyor’s fee.
• Fire & Liability Insurance – The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the lender will receive the monies owed.
• Legal Fees – the fees paid to your lawyer or notary public to represent your interests in this sale.
• Other last-minute costs – these may include a home inspection, moving expenses, deposits for utility companies, locksmith, etc.

Grants and Rebates for Property Buyers

GST/HST Rebate on New Homes – new home buyers can apply for a rebate of the federal portion of the HST (the 5% GST amount) if the purchase price is less than $350,000. The rebate is up to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes priced between $350,000 and $450,000. Visit www.cra-arc.gc.ca and enter “RC4028” in the search box, or call 1.800.959.8287.

Enhanced New Housing Rebates – if you purchase a new home (house, condo, apartment; something considered “real” property) with a purchase price of up to $850,000 as your principal residence and the HST becomes payable son or after April 1, 2012 and before April 1, 2013 (the transition period) you are entitled to a rebate of 71.43% of the provincial component of the HST paid on the purchase price up to a maximum of $42,500. This rebate is also applicable to the purchase of a secondary “vacation” or recreational home (e.g. cabin, cottage, etc.) outside the Greater Vancouver and Capital (Victoria) regional districts (such as Kelowna, Kamloops, the Interior, etc.) also priced up to $850,000.

This means that if you are purchasing a new home under $350,000 you are eligible for both the federal AND provincial rebates. However if your new home is priced over $350,000 you may not be eligible for the federal rebate, but until April 1, 2013 you are still eligible for the provincial rebate.

First-Time Home Buyer’s Tax Credit – this is a non-refundable tax credit for qualifying buyers of detached, attached, apartment, condominium, mobile home, or share(s) in a cooperative housing corporation, including existing homes or new homes under construction. It is calculated by multiplying the lowest personal income tax rate for the year (15% in 2011) by $5,000. For 2011, the maximum credit was $750. Disabled persons do not need to be first-time home buyers in order to qualify for the credit. Visit www.cra-arc.gc.ca/hbtc, or call 1.800.959.8281.

BC First-Time New Home Buyer’s Bonus – this is different from the tax credit described above. Eligible buyers can qualify for a bonus of up to $10,000. Criteria for the bonus are:

• purchase or build a new home located in BC
• you (or you and your spouse/common law partner) must never have previously owned a primary residence
• to be a resident of BC (file a 2011 BC personal income tax return, or if you moved to BC after December 31, 2011 you file a 2012 BC personal income tax return)
• you are eligible for the BC HST New Housing Rebate (as described above)
• you live in the property as your primary residence

If your individual net income is over $150,000 (see line 236 of your income tax return), that bonus is reduced by $0.20 for every dollar over $150,000 and is eliminated at $200,000. For couples with a family net income over $150,000 the bonus is reduced by $0.10 for every dollar over $150,000 and is eliminated at $250,000 family net income. You are required to submit an application to the BC government with documentation to demonstrate your eligibility for this bonus and application forms are available on the BC Ministry of Finance website at www.gov.bc.ca/fin

CMHC Mortgage Loan Insurance Premium Refund – Provides home buyers who have CMHC mortgage insurance with a 10% refund on their premiums and possible extended amortization without surcharge when buyers purchase an energy efficient home, or make energy-savings renovations. Visit www.cmhc.ca/en/co/moloin/moloin_008.cfm#reno, or call 604.731.5733.

RBC Energy-Saver Mortgage – Homeowners who have a home energy efficiency audit within 90 days of receiving an RBC Energy Saver ™ Mortgage may qualify for a $300 rebate credited to their RBC account. Visit www.rbcroyalbank.com/products/mortgages/energy-saver-mortgage.html, or call 1.800.769.2511.

If you wish to discuss any of these topics or would like any assistance in purchasing a new home, please feel free to contact Dennis at 604-585-4343 or dennis@dfung.com.

The Market is Changing…

Summer is traditionally slow in real estate here in the Lower Mainland; you’d think that people would be more inclined to shop around during the summer with good weather and gardens in bloom, but it seems as though people don’t want to disrupt their summer vacations and activities. I guess I can hardly blame them.

Numbers from the Fraser Valley Real Estate Board (FVREB) show the market to be steady in comparison to last year, but August saw the new Federal lending rule restrictions come into effect regarding maximum borrowing amount, amortization period, and purchase price for CMHC insurance, which some analysts fear may negatively affect the relatively stable market.

When I say “stable market” I’m referring to both the number of sales as well as sale prices. According to the monthly statistics package for July 2012 from the FVREB[1], the total number of sales for July 2012 for detached homes in Surrey is up 3.1% over July of 2011, but down 0.1% from June of this year. Townhouse sales are down 1.8% over July last year, and down 4.1% from June. Apartment/condo sales saw a slight decrease, down 0.2% from July 2011, but up 9.7% from this past June. Yet overall, for all property types in Surrey, the total number of sales may be up 3.7% from July 2011, however the total number of sales is down 6.1% from June of this year, indicating that we have not quite regained the numbers we were seeing last year at this time.

Benchmark pricing has remained fairly steady as well; for July 2012 the benchmark price for detached homes was $567.400, up 5.6% from July 2011, but only up 0.3% from $565,900 in June of this year. Townhouse prices increased by 0.6% to $304,500 from $302,700 in July 2011, and down 0.7% from $306,500 in June 2012. Apartment/condo prices again saw a decrease of 1.7% to $195,600 from $198,900 in July 2011, and down 3.1% from $201,800 this past June. Average price[2] for all property types in Surrey combined is actually up 3.1% to $572,009 compared to $554,552 in July 2011, and down only 0.1% from $572,725 in June 2012. Overall, Surrey has seen a net gain of 3.0% in both the number of sales as well as average sale prices.

But the monkey wrench analysts are concerned about are the changes to mortgage lending rules that were announced in June but just went into effect last week. The Federal Finance Ministry announced that borrowers would only “be allowed to use up to 80% of their property’s value as collateral for home-equity loans, down from 85%” (Financial Post Staff, 2012), as well as reducing the maximum amortization period from 30 years to 25 years for government-insured (CMHC) mortgages (Ibid.), and limiting these mortgages to homes with a sale price of under $1 million (Ibid.).

Critics like Marie Bennett are concerned that first-time home buyers will be prevented from making a purchase, stating that these restrictions are equal to a 1% increase in mortgage interest rates (2012) while the Federal government is concerned about preventing a crisis as seen in the US with the sub-prime mortgage, and preventing Canadians form being able to acquire that level of debt.

So what does this all mean for the real estate market here in the Fraser Valley? Well, we could expect to see a market correction that started earlier this year with prices either remaining steady or decreasing. New home buyers may have to wait a bit longer to make that first home purchase, but waiting in order to save more money for a down payment, or purchasing a condo or townhouse may offer that opportunity for home ownership and to build equity for “good” debt versus “bad” or retail consumer debt. Regardless, it confirms that the market has slowed down overall, but that there are still purchases and sales to be made. As at any time during the market cycle, it pays to shop around as there are good prices available and good properties out there.

 

 

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[1] http://www.fvreb.bc.ca/statistics/Package%20201207.pdf

[2] Average price is not the same as benchmark price, which accounts for the most sought-after features in any given home type.

Transitional HST/PST Rules for BC and Enhanced New Housing Rebates

Unless you’ve been out of the province, you’re aware that British Columbia residents voted to scrap the much-debated and confusing HST legislation last summer. The date for the PST to be reinstated is April 1, 2013 but of course in real estate sales and purchases take place over a number of weeks, or even months for some development projects. So what happens during that gray area if you have an accepted offer prior to April 1, 2013 that doesn’t complete until after April 1, 2013? Well there are some transitional rules that govern these situations, much as happened when the HST was being implemented.

As per the Tax Information Notice issued on February 17, 2012 (http://www.hstinbc.ca/media/2012_housing_rules_FEB.pdf), HST will no longer be charged on real property (including residential property) “if ownership and possession of the property transfer on or after April 1, 2013. This will be the case for sales of new housing, irrespective of whether the agreement of purchase and sale was entered into before April 1, 2013 or whether construction of the new housing began before April 1, 2013″ (p 13, emphasis added). For example; a Buyer and a Vendor agree on an offer dated February 15, 2013. Subjects are removed and the Buyer tenders a deposit of $25,000 on March 1, 2013, but the possession date is April 27, 2013. Because the Buyer will not take possession of the house until April 27, 2013, the HST will not be charged on the purchase of the house. If the property is a resale house then GST will not be charged on the purchase price of the house, either.

In the case of new housing, a transition tax of 2% on the sale of new housing is calculated on the “total consideration” (i.e. the total negotiated sale price; why they can’t say that, I don’t know) will be paid by the Buyer to the builder and paid on the date that the GST becomes payable (i.e. April 1, 2013). The negotiated sale price of a new home must not be inclusive of the BC transition tax; the builder must disclose in the Contract of Purchase and Sale that the negotiated sale price does not include the transition tax. The builder must also disclose to the Buyer whether or not the negotiated sale price includes the 7% provincial component of the HST (if ownership and possession of the new housing takes place before April 1, 2013).

Clear as mud? Great. On to something much simpler; the enhanced new housing rebates!

And yes, this is much simpler! Basically, if you purchase a new home (house, condo, apartment; something considered “real” property) with a purchase price of up to $850,000.00 as your principal residence (either you or a family member has to live there, no renting it out on the sly) and the HST becomes payable* on or after April 1, 2012 and before April 1, 2013 (aka the transition period) you are entitled to a rebate of 71.43% of the provincial component of the HST paid on the purchase price up to a maximum of $42,500.00.

As well, purchasers of new secondary “vacation” or recreational homes (e.g. cabin, cottage, etc.) outside the Greater Vancouver and Capital (Victoria) regional districts priced up to $850,000.00 will also be eligible to claim the 71.43% rebate on the provincial component of the HST paid on the purchase price up to the same maximum of $42,500.00 during the transition period.

There is also another bonus if you are a first-time buyer and decide to purchase a new home, titled – somewhat obviously – the BC First-Time New Home Buyers’ Bonus. The requirements are:

• purchase or build a new home located in BC
• you (or you and your spouse/common law partner) have never previously owned a primary residence
• to be a resident of BC (file a 2011 BC personal income tax return, or if you moved to BC after December 31, 2011 you file a 2012 BC personal income tax return)
• you are eligible for the BC HST New Housing Rebate (as described above)
• live in the property as your primary residence

If you meet these criteria, then you qualify for the bonus of up to $10,000.00.

There is a “phase-out” for higher-income earners, so if your individual net income is over $150,000 (see line 236 of your income tax return), that bonus is reduced by 20 cents ($0.20) for every dollar over $150,000, and zeroes out at $200,000. For couples with a family net income over $150,000 the bonus is reduced by 10 cents ($0.10) for every dollar over $150,000 and zeroes out at $250,000 family net income. You will be required to submit an application to the BC government with documentation to demonstrate your eligibility for this bonus (likely your income tax return, but don’t quote me) and the application forms will be made available on the BC Ministry of Finance website (www.gov.bc.ca/fin)

So there’s still some good news for buyers! And hopefully provide some incentive to make the coming year (April 1, 2012-2013) a vibrant one for new home sales.

For more information on the new transition guidelines, bonuses, and rebates, please contact Dennis Fung at 604-585-4343.

*For new home sales, GST/HST becomes payable on the purchase of a home on the earlier of the day on which ownership is transferred to the recipient and the day on which possession of the property is transferred to the recipient. Generally, purchasers do not take possession of a property until the ownership has been transferred and registered.

References

BC Ministry of Finance. (February 17, 2012). Tax information notice: enhanced new housing rebates and transitional rules for the re-implementation of the British Columbia provincial sales tax. http://www.hstinbc.ca/media/2012_housing_rules_FEB.pdf.

BC Ministry of Finance. (2012). The BC first-time new home buyers’ bonus. http://www.sbr.gov.bc.ca/documents_library/notices/FTHB_Bonus.pdf.

HST Information Office. (2012). Return to PST: new home purchases. http://www.hstinbc.ca/buying_goods/buying_a_home/new_home_tax_calculator.