A new report that has been commissioned by combined builder and broker mortgage associations has been be-wailing one big disadvantage when buying a new home. The Canadian Government will levy GST on a new home, whereas re-sale homes are exempt.



On an average house price this can add an extra $20,000 into the outlay. This is $20,000 that is not included in the asking price, it is an add on. Since the GST was introduced in 1991, house prices have more than doubled, which means that the GST portion has doubled too. However, the house prices have jumped up and over the rebate ceiling and many people are not able to take advantage of the rebate anymore.

This means that whereas, in 1991 when the bill was introduced, over 90% of house owners qualified for a full rebate, now only 52% qualify. The GST bill was supposed to be reviewed every two years, but the rates have never once been adjusted.....

The Chairman of the Residential Construction Council of Ontario, has pointed out that the effective amount of GST paid per new home increased by 95% from 1991 to 2007. This is 2.5 times more than the rate of growth for the average weekly wage in Canada.

All this is of interest to you if you are selling your home, as your home will not include the hefty GST bill at the end of the sale. Unfortunately, the report turned up one other deficiency which will affect your house sale, as well as also affecting the sale of new homes.

The Canadian Association of Accredited Mortgage Professionals investigated the Home Buyers Plan which was introduced in 1992. Under this tax umbrella, first time buyers are allowed to withdraw up to $20,000 tax free from their Registered Retirement Savings Plan to be used as a down payment on a home.

This is still in effect, but this amount has also not been increased since its initiation, while house prices have gone up by 104%! The Home Buyer's Plan has been renounced in the report, as 'becoming less effective as a means to support Canadians in their aspirations for home ownership'.

Land transfer taxes are another lucrative area for government cream-offs. Toronto is just about to put theirs up at February 1st., making them the holder of the highest land transfer tax (LTT) in Canada. In Toronto the average house pays $8,300 in LTTs. Land Taxes have also increased in much larger percentages than the house prices that they are related to.

In B.C. they rose by 179%, asking an average of nearly $7,000 per land transfer. Quebec increased their LTT by 136% to $1,800. per home.

If anyone feels like taking up the challenge, the author of the report, Will Dunning, has stated that these increases fail to meet any definition of fairness. He says that they are a discriminatory tax and as such, have to justify the government's or society's at large expenses for the related service ( home buying). This, it does not do.