Poor Helmut Pastrick is at it again, (HT Raize on Realestatetalks) providing insight into how markets will react with BC voters laying the smack down on a harmonized sales tax. So let’s assume for a moment what’s done is done and look again at how the HST affects house prices. According to Pastrick:
According to Pastrick—chief economist for Central 1 Credit Union, the association of credit unions in B.C. and Ontario—some buyers, especially of new homes, may delay purchases and save themselves some extra money.“Will it hurt?” Pastrick asked in a phone interview with the Georgia Straight. “I think that impact will be temporary. The activity would be made up under the new system shortly, and indeed under the new system, the demand for housing is somewhat improved given the lower costs that will be in effect. So that would provide some lift to the housing market.”A housing-market analyst with the Canada Mortgage and Housing Corporation in B.C. before joining Central 1 in 1997, Pastrick said that the changeover period will also likely see postponements in the planned construction of new homes.“It depends on the transition rules, but in general I would expect to see some delay into the new tax system for some new construction,” he said.
Ah so demand will improve under the new system. Well that’s good news. But let’s remember a few things about the housing market:
- Most housing stock is not taxed and often competes directly with new stock.
- A large part of total costs are associated with land prices.
- Developers want to make money.
- Rational investors have other competing investment choices.
- It is true that Realtor and other transaction fees will be taxed less under the new regime.
I do not pretend to be a professional economist, but I’m trying real hard to figure out how, as an investor, I would hold off a purchase solely due to the repealing of the HST. After all, I can factor the tax into my ROI calculations. Please help me out, readers!