Economic News/Trends and Analysis — March 26, 2009

Sales tax harmonization will hurt resale home market

    TORONTO, March 26 /CNW/ - Ontario's REALTORS(R) say the McGuinty
governments plan to harmonize the GST and PST will add over $2,000 to the cost
of a real estate transaction, hurting the resale home market and prolonging
the housing industry's recovery from the current economic downturn.
    "Now is not the time to be erecting barriers to homeownership," said
Pauline Aunger, President of the Ontario Real Estate Association. "We need
consumers to invest in housing to help get our economy going again."
    According to the Canadian Real Estate Association, home sales in the
province of Ontario were down 29 per cent in February, compared to 2008.
    Under a harmonized sales tax (HST), home buyers and sellers will have to
pay extra tax on a range of services associated with real estate transactions
such as legal fees, moving costs, real estate commissions and home inspection
fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on
these services.
    "These additional taxes could price some homebuyers, especially
first-time homebuyers, right out of the market," explained Mrs. Aunger.
"Harmonizing will not help homebuyers in any way."
    For a resale house priced at $360,000, a HST could add over two thousand
dollars in new taxes to closing costs. In total, a HST will add $313 million
annually in new taxes to resale home transactions.
    "In the last decade, Ontario's homeowners have faced a barrage of new
costs," said Aunger. "From municipal land transfer taxes to sky rocketing
property taxes, homeowners are being pushed to the brink to accommodate
increasing demands from government. A harmonized sales tax is yet another cash
grab on Ontario's already overtaxed homeowners."

    The Ontario Real Estate Association represents 47,000 brokers and
salespeople who are members of the 42 real estate boards throughout the
province. Members of the association may use the "REALTOR(R)" trademark, which
identifies them as real estate professionals who subscribe to a high standard
of ethics and service.
    OREA serves REALTORS(R) through a wide variety of professional
publications, educational programs, advocacy and other services. A division of
the association, the OREA Real Estate College, provides real estate
registration education courses in Ontario.

    
    QUICK FACTS

    -------------------------------------------------------------------------
                        Table 1: HST and Resale Homes
    -------------------------------------------------------------------------
                            Current Tax                           HST Tax
    Taxable Service           Payable          New Taxes          Payable
    -------------------------------------------------------------------------
    Mortgage Insurance
     Premiums(1)                 $752.40        $470.25(2)          $1222.65
    -------------------------------------------------------------------------
    Legal Costs                   $50.00            $80.00           $130.00
    -------------------------------------------------------------------------
    Real Estate
     Fee/Commission              $720.00-        $1,152.00-        $1,872.00-
                               $1,080.00         $1,728.00       $2,808.00(3)
    -------------------------------------------------------------------------
    Home Inspection               $20.00            $32.00          $52.00
    -------------------------------------------------------------------------
    Title Insurance               $24.00            $15.00          $39.00
    -------------------------------------------------------------------------
    Total New Tax:                               $1,749.25-
                                                 $2,325.25
    -------------------------------------------------------------------------

    -   Ontario's real estate industry is essential to the provincial
        economy. In 2008, real estate in Ontario accounted for $56.6 billion
        in sales, $6.01 billion in ancillary economic spending and $1.35
        billion(4) in land transfer tax revenue to the provincial government.
        In addition, real estate employs 110,000 Ontarians directly and
        indirectly.(5)

    (1) CMHC premium of 2.75% for mortgage with a 5% down payment on a
        $300,000+ home.
    (2) Consumers currently pay the 8% PST on mortgage insurance premiums.
    (3) Real estate commissions are negotiable or may be a flat fee.
        Estimated range of 4% to 6% used.
    (4) Ministry of Finance, Public Accounts, 2007/2008.
    (5) Altus Group, "Economic Impact of MLS(R) Home Sales," June 12, 2007.
    

For further information: Jim Flood, Director of Government Relations,
(416) 442-3408

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