Steven Tse's Real Estate Blog

On Feburary 17th, 2012 the Government announced the transitional rules for returning to the PST. Below you will find information as well as the detailed tax information notice on these rules.

The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax. The transition rules provide certainty for new-home construction and sales, particularly during the transition period.

For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

Average amount of embedded sales tax in newly built homes under PST: two per cent.
Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
Tax rate on a newly built home during transition: two per cent.

The B.C. new housing rebate threshold will be increased to $850,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500. It is important to note that the HST does not apply to resale housing.

To help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.

B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.
The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.
The temporary housing transition tax and the temporary housing transition rebates will be administered by the Canada Revenue Agency on behalf of B.C. The Province is administering the grant for new secondary vacation and recreational homes.
Tax Information Notice:
Enhanced New Housing Rebates and Transitional Rules for the Re-implementation of the British Columbia Provincial Sales Tax

More Information

If you have questions regarding eligibility requirements for the enhanced new housing rebates or new rental housing rebates or about the application of the B.C. transition tax or B.C. transition rebate, please call the Canada Revenue Agency at 1‐800‐959‐8287 (English) and 1‐800‐959‐8296 (French) or go to:

http://www.fin.gc.ca/n12/12-017-eng.asp (English)
http://www.fin.gc.ca/n12/12-017-fra.asp (French)

*information taken from www.pstinbc.ca

Jonathan Fowlie, Vancouver Sun

VICTORIA — The provincial portion of the Harmonized Sales Tax is about to drop to two per cent on all new homes sold for $850,000 or less, a move widely praised by those in the beleaguered home building industry.

Announced by Finance Minister Kevin Falcon on Friday, the move is meant to help smooth the transition from the HST back to the old PST.

“The rules we are announcing will ensure that purchasers and builders are treated equitably throughout the transition period,” said Falcon, adding the new home sector is one of the most complicated areas for the transition.

On Friday, Falcon officially confirmed the province will return to the PST on April 1, 2013 — a date he called the earliest moment that government could “responsibly” accomplish the transition.

To help ease the transition in the sale of new homes — where an overnight move from HST to PST would have led to a dramatic change in prices — Falcon announced that on April 1 of this year, his government will significantly increase the threshold for its HST rebate program.

The move means new homes costing up to $850,000 will now be subject to only two per cent of the provincial portion of the HST, as opposed to the full seven per cent.

Currently, only homes up to $525,000 qualify for that rebate program.

Falcon said his government is also introducing a similar rebate for new recreational homes that are outside the Capital and Greater Vancouver regional districts.

Currently, there is no HST rebate for new second and recreational homes of any price anywhere in the province.

As of April 1, Falcon said, new recreational and secondary homes outside those two regions will qualify for the rebate if they are sold for $850,000 or less. The five per cent federal portion of the HST charged on new homes will remain unchanged in the transition, officials said, adding the federal HST/GST rebate programs will also not change.

Falcon said he chose the $850,000 level because that captures about 90 per cent of the market, adding people who pay more can clearly afford to absorb a bit of a hit.

“It’s my view that those who are able to afford to purchase homes $850,000 and higher don’t require the same level of support from their government as those who are purchasing up to $850,000,” he said.

He added that mega homes will qualify for the rebate up to the $850,000 mark, and that the full seven per cent provincial portion of the HST will be charged on any amount above and beyond that point.

Falcon also announced Friday the government is introducing a two-year transition tax for homes built while the HST is in place, but sold after the PST has been reintroduced.

That two-per-cent tax will take effect April 1, 2013 and will apply to new homes at all price points. Falcon said the measure is meant to ensure people building or buying a home before and after April 2013 are treated equally.

“If you did not do that … you would create a market distortion such that effectively you would create a Wild West in the building industry,” he said.

“Everyone would go crazy trying to get everything built really fast prior to that cutoff period, and, of course, make sure all the contracts close on April 1, 2013.”

The two-per-cent number is significant, Falcon said, because that is the rough amount of tax that is embedded into a new home that is constructed when the PST is in place.

That is because under PST, tax is charged on building materials, whereas under HST materials are not taxed at all.

Thus, the idea is that the two per cent tax rate will apply now in the form of the provincial portion of the HST on all homes under $850,000.

It will then apply to homes built during HST, but sold under PST, in the form of the two per cent transitional tax.

And, once the PST is back in full swing, the two per cent will be added to home prices in the form of an embedded tax.

The measures were immediately celebrated by people in the home building industry, many of whom have been hard hit by the increased costs that the HST had meant for many consumers in the sector.

“It’s everything we asked for and more,” said Peter Simpson, president and chief executive officer of the Greater Vancouver Home Builders Association.

“They’ve neutralized the impact of HST,” he added.

“It’s good news as far as we’re concerned.”

M.J. Whitemarsh of the Canadian Home Builders’ Association of British Columbia agreed.

“I think it’s a good move on government’s part. It’s a bold move,” she said.

“It’s something that’s got immediacy to it,” she added.

“It’s something that’s really going to spur the home building industry.”

New Democratic Party finance critic Bruce Ralston said he believes the announcement will be good for the home builders, but questioned why it took so long to announce.

“Why it had to be delayed so long I don’t quite understand, given it’s a relatively straightforward announcement,” he said.

Ralston added that he believes the most significant news from Friday’s announcement is that the HST will remain in B.C. until the end of March 2013.

“That confirms it’s going to take 19 months,” he said.

REBGV Vol. 7 No.2 – The controversial Harmonized Sales Tax (HST) which adds sever per cent to a range of goods and services including new homes and REALTORS services, was voted out in a referendum last summer.

On August 26, 2011 Finance Minister Kevin Falcon announced that the province was developing an action plan to extinguish the HST and return to the Provincial Sales Tax (PST). The minister then estimated the transition process would take a minimum of 18 months to March 2013.

Where are we at and why is it taking so long? The problem is that the form PST system was completely dismantled, and the province now has to “develop and establish appropriate report, data gathering, billing, remittance, collection, audit, assessment and appeal processes,” explains Minister Falcon.

“This includes staffing, facilities and equipment, and staff training to administer the PST,” says Minister Falcon who notes that the BC government will register approximately 100,00 business as tax collectors before the PST is re-implemented and will also provide training for them.

“By the time the PST is re-implemented there will be 30,000 new business in BC with no PST experience. They will need to change their own electronic and manual systems and process to assess collect, report and remit the PST and other related taxes to the provincial government.”

The province is currently working with the federal government to develop general transitional rules and processes, including those specific to the housing sector. This all takes time.

The province is also drafting legislation and regulations to re-implement the PST and to streamline and improve it.
The federal and provincial governments have also come to an agreement about repayment of the $1.6 billion in transition funding BC received to implement the HST. Under the agreement, BC has five years to repay in full the transition funding, and Canada has agreed to waive any interest charges over this period.

The ministry of Finance has met with industry associations and stakeholders to discuss suggestions for improving the PST and issues related to the transition period and transition rules.

The latest estimate is that it could take as long as 24 months (to August 2013) to make the transition back to the PST.

Property owners throughout BC received their 2012 assessment notice the first week of January from BC Assessment.

This notice is BC Assessment’s (BCA) estimate of a property’s value as of July 1, 2011, and for new construction or substantially renovated homes, the physical condition as of October 31, 2011.

BCA is the government agency responsible for determining and reporting property value estimates for the 1,917,394 properties in its database, a 0.75% increase in the number of properties since 2011.

BC Assessment and a REALTOR® assessment. Why the difference?


BCA’s assessment and the market value determined by a REALTOR® may be different. Why?

Both BCA assessors and REALTORS® calculate market value by analyzing sales of comparable homes within a local market, and look at factors that affect value such as size of home, view, location – on a busy or quiet street, number of bedrooms, construction quality, floor level, and garage or parking stalls.

Where every lot and every home on a street
are typically the same, both BCA’s value and a REALTOR’s® value will be similar during stable market conditions.

Differences occur in neighbourhoods where lots have been rezoned or are different shapes and sizes, where architecture and views are unique, and where owners have made changes that BCA hasn’t yet taken into account.


Differences also occur during market instability when prices rise or fall during the six-month period between July 1 and January 1 the following year.

Wake-up call – how to appeal an assessment

Since July 1, 2011 home owners may have seen prices stalling in some neighbourhoods and rising in others. Assessments may reflect these changes.

The deadline to appeal is January 31, 2012

Property owners who disagree with their assessment should do their homework by visiting www.bcassessment.ca and then e-valueBC to compare their assessment with those of their neighbours. Each year, about 1.6% of all BC property owners appeal their assessment.

Property owners should first contact their local assessment office and talk to staff who can make adjustments If there is an obvious error, for example if BCA includes a new swimming pool, when, in fact, the pool is a shallow fish pond.

Property owners who decide to appeal must file a written request by January 31, 2012. For information, visit www. bcassessment.ca and select Learn more about the Notice of Complaint (Appeal) process and the Property Assessment Review Panel.

What can an appeal mean for a property owner?

While BCA determines the assessed value of property tax for tax purposes, it’s the local taxing authorities – both provincial and local governments – which set tax rates each spring according budget requirements.

The formula for calculating taxes on property is:

Tax Rate x Assessed Value / 1,000

If the tax rate is 4.000 and the property assessment is $1 million, then the taxes payable are $4,000.

No notice

Property owners who haven’t received an assessment notice by mid-January should contact the area phone numbers listed above or request their tax notice online at www.bcassessment.ca. (See Receive your assessment notice online – right hand side).

If a property owner has concerns about their local taxes, the should contact their local government office. Taxes aren’t appealable.

New feature – save assessment data

Visit www.bcassessment.ca and select e-valueBC to view and compare the assessed value of any BC property. A new feature this year lets you download and save assessment data as a PDF or an Exel file.

VANCOUVER, BC – REBGV, November 2, 2011 – With a sales-to-active property listings ratio of 15 per cent, the Greater
Vancouver housing market continues to hover at the lower end of a balanced market and has been trending in that
direction over the past five months.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales of detached, attached
and apartment properties on the region’s Multiple Listing Service® (MLS®) system reached 2,317 in October, a 1
per cent decrease compared to the 2,337 sales in October 2010 and a 3.2 per cent increase compared to the previous
month. Those sales rank as the second lowest total for October over the last 10 years.

“Right now, prospective home buyers have a good selection of properties to choose from and more time to make
decisions,” Rosario Setticasi, REBGV president said. “Home sellers should be mindful of local market conditions to
ensure they are pricing their properties competitively.”
New listings for detached, attached and apartment properties in Greater Vancouver totalled 4,374 in October, which
is on par with the 10-year average. This represents an 18.3 per cent increase compared to October 2010, when 3,698
properties were listed for sale on the MLS®, and a 23 per cent decrease compared to the 5,680 new listings reported
in September 2011.

The total number of properties listed for sale on the Greater Vancouver MLS® system currently sits at 15,377,
which is 9.3 per cent higher than the 14,075 properties listed for sale during the same period last year. October was the
first month that the total number of property listings showed a decrease this year.
The MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver over
the last 12 months has increased 7.5 per cent to $622,955 in October 2011 from $579,349 in October 2010. However,
since reaching a peak in June of $630,921, the benchmark price for all residential properties in the region has declined
1.3 per cent.
Sales of detached properties in October reached 974, which represents virtually no change from the 976 detached
sales recorded in October 2010, and a 34.5 per cent decrease from the 1,487 units sold in October 2009. The benchmark
price for detached properties increased 11 per cent from October 2010 to $884,778, but decreased 1.3 per cent
compared to the previous month.
Sales of apartment properties reached 958 in October, a 2.6 per cent decrease compared to the 984 sales in October
2010, and a decrease of 40.4 per cent compared to the 1,607 sales in October 2009. The benchmark price of an
apartment property increased 3.2 per cent from October 2010 to $402,702, but decreased 0.7 per cent compared to the
previous month.
Attached property sales in October totalled 382, a 1.3 per cent increase compared to the 377 sales in October 2010,
and a 37.4 per cent decrease from the 610 attached properties sold in October 2009. The benchmark price of an attached
unit increased 6.5 per cent between October 2010 and 2011 to $519,455, and increased half a per cent compared
to the previous month.

REW – FRIDAY SEPTEMBER 2, 2011 – A rise in multi-family construction – primarily condominiums – pushed housing starts in BC higher in July, reports the BC Central one Credit union.

Total housing starts in the province rose to a seasonally-adjusted annualized rate of 30,000 units, up 29 per cent form June and 33 per cent above July 2010. Despite the large month-to-month gain, new home activity has been highly volatile since early 2010, fluctuating around an average of 26,400 units.

Housing starts in Metro Vancouver lagged the provincial performance in July, rising 16 per cent to an annualized rate of 18,200 units.

In all BC’s urban areas, multi-family starts rose 48 per cent from June to reach an annualized rate of 20,800 units, while single-detached starts increased just 4 per cent to 7,400 units. Although total housing stats have been volatile, recent activity suggests that single detached starts troughed in early 2011 following a year long downtrend and are now on a modest upward trend.

Meanwhile, the underlying trend in the volatile multifamily sector continues to point higher.

Total annual provincial housing starts this year are expected to remain close to 2010 levels but fall short by 3 per cent, due to weaker activity earlier this year. However the underlying trend will be positive and continue to rise through 2013. Near-term growth could be limited by the recent dampening in housing demand, reflected in declining sales of existing homes, according to Central economist Brian Yu.

TARA PERKINS, GLOBE & MAIL – August 29, 2011 – Canada Mortgage and Housing Corp. says that it has seen mortgage refinance activity drop nearly 40 per cent since Ottawa brought in new rules.

The crown corporation, which must now issue quarterly financial results as a result of a new law, issued its second-quarter results on Monday and they include insight into how Canada’s housing industry is faring.

CMHC said that refinance activity fell by almost 40 per cent and has continued to remain around that level since Finance Minister Jim Flaherty made changes to the mortgage insurance rules earlier this year. One of those rules was to reduce the maximum amount that Canadians can borrow in refinancing their mortgages from 90 per cent to 85 per cent of the value of their homes. That rule kicked in on March 18.

Among the other rule changes, Mr. Flaherty cut the maximum term of new mortgages where the home-buyer’s down-payment was less than 20 per cent from 35 years to 30 years.

CMHC said Monday that after the rules took effect purchases of CMHC homeowner mortgage insurance initially fell by about 10 per cent, and by the end of June was still about five per cent below the level of sales before the rule changes.

But CMHC’s profits still rose by $61-million or 19 per cent, to $383-million, for the three months ended June 30 thanks to earnings from mortgage-backed securities, gains from selling financial instruments, and lower expenses.

REAL ESTATE WEEKLY, Friday August 12, 2011 – A national rise in home sales in June, and further signs of strength in July, has encouraged the Canadian Real Estate Association to predict a rise in sales into 2012.

“The rise in monthly home sales activity at the end of the second quarter, upbeat business sentiment and hiring intentions, and signs that the Bank of Canada is in no rush to raise interest rates bode well for home sales activity and prices going into the second half of 2011,”said Gregory Klump, CREA’s chief economist.

Meanwhile, the BC Real Estate Assocation says province-wide residential sales are forecast to increase 5 per cent from 74,640 units in 2010 to 78,200 units this year, before increasing a further 3.1 per cent in 2012.

Considering the second quarter as a whole, however, national sales activity slipped by almost 5 per cent compared to the first quarter of 2011.

Canada’s national realty association is now forecasting a drop in housing sales for all of 2011, down 1.3 per cent compared to 2010. The group then expects the sector to rebound, with activity growing 2.6 per cent in 2012.

Canada’s continued economic recovery and the country’s historically low interest rates have put some lift into the housing sector. Those factors, however, have been outweighed by the Bank of Canada’s worries over mortgage debt and Ottawa’s new rules designed to squeeze out risky home buyers, CREA noted.

The country’s second quarter housing rollercoaster, however, did not put the brakes on home prices, which continued to rise. The average price of a home nationally rose 8.7 per cent in June compared to May, reaching $372,700.

CREA predicts that home prices for 2011 will rise four per cent and less than one percentage point in 2012.

By contrast, American prices for new homes are expected to rise 1.6 per cent in 2011 while the average value of an existing house in the United States – a different market than the new house segment – could drop by almost 2.5 per cent in the same 12 month period.

REAL ESTATE WEEKLY, Friday May 31 – Most analysts do not expect the Bank of Canada to raise the prime lending rate this month, after holding its trend-setting rate at 1.25 per cent in April.

While interest rates are widely expected to rise this year to keep inflation under wraps, language used in teh APril policy rate announcement has been interpreted by some financial market economists as a signal that the Bank will resume raising interest rates.

however, many others point to the strong Canadian dollar as evidence the Bank rate will not move much, if at all, at the next setting at the end of this month.

By keeping its trend-setting policy interest rates where the are, interest rates remain very positive for Canadian economic growth. Moreover, the Bank reiterated its statement that “any futher reduction in monetary policy stimulus would need to be carefully considered.” This suggests the Bank’s continued intention not to make any sudden moves on interest rates, according to the Canadian Real Estate Association.

The Bank will make its next scheduled rate announcement on May 31st, 2011.

REW – APRIL 22, 2011 Housing sales in Greater Vancouver during March hit the highest level for the month since 2004 as 4,080 home sold, according to the Real Estate Board of Greater Vancouver. Total sales were 30.1 per cent higher than in March of last year and sales of detached houses doubled.

“With more than 4,000 sales and nearly 7,000 home listings added to the MLS in March, it’s clear that home buyers and sellers view this as a good time be active in the local housing market,” said Rosario Setticasi, Board president.

Listings were up 19.4 per cent from February but down 3 per cent from the record level in March of 2010, the Board reports. There are now more than 13,100 listings on MLS across Greater Vancouver.

“Conditions favour sellers at the moment, but we are seeing differences in home price trends and overall activity depending on the region and property type, “Setticasi said. For example, the “benchmark” price for a West Side detached house was up 15 per cent in March, compared to last year, at $1.9 million, but the price of a typical detached house in East Vancouver was up just 9.8 per cent to just over $806,000 according to Board statistics.

This means it is vitally important that buyers work with a local Realtor who knows the neighbourhoods and can advise on house values.

Across all of Greater Vancouver, the benchmark price for a detached house is $866,806, up 8.3 per cent from a year ago. Sales are up 100 per cent from March of 2010. Prices for attached homes are up 3.6 per cent to $511,039. Sales of condo apartments soared 29.6 per cent in March compared to March 2010, and the benchmark increased 2.1 per cent to $403,885.