Housing construction and new home sales will soon be on a much firmer footing in British Columbia as the government reverses the harmonized sales tax, industry experts said Friday.
Finance Minister Kevin Falcon unveiled a series of harmonized sales tax relief measures he said gives home buyers and builders a more solid foundation to transition out of the controversial tax British Columbia voters rejected last summer.
Mr. Falcon said the government will officially return to the seven-per-cent provincial sales tax by April 1, 2013, ending a bleak period for the Liberals that included the early departure of former premier Gordon Campbell and continues to shackle Premier Christy Clark, who replaced Mr. Campbell last year.
Mr. Falcon said starting April 1, 2012, the government will raise the HST rebate threshold for new home buyers to $850,000, up from the current $525,000.
He said that means more than 90 per cent of new homes will be eligible for the rebate of up to $42,500, up from the previous $26,250.
Mr. Falcon said the changes ensure there is fairness through the transition period and provides a road map for the housing industry to make the transition back to the PST as smooth as possible.
“The homebuilding industry has been really looking for clarity and certainty, and that's exactly what we will be delivering here today,” said Mr. Falcon, at a press conference attended by homebuilding industry stakeholders.
After the HST-end date, those who buy a home built before April 1, 2013 will pay a two per cent transition tax on the full house price, he said.
Homebuilders, who have been lobbying strongly for HST relief since last year, were pleased with Mr. Falcon's changes.
Phil Hochstein, president Independent Contractors and Builders Association of B.C., said the HST changes are well thought out and are “definitely worth the wait.”
“This is the kind of thing that deals with housing affordability and I think throughout the province it will help kick start the housing industry and people involved in construction,” he said.
Urban Development Institute executive director Maureen Enser said the changes provide certainty to both home buyers and builders.
“At the very least, the industry was expecting clarity on the HST transition rules and how this might affect pre-sale agreements,” she said in a statement. “The Government's announcement today has gone much farther and is a strong reflection of the economic importance of B.C.’s development sector.”
The institute represents more than 550 of British Columbia's residential, commercial, industrial and institutional developers who create $30-billion worth of economic activity and more than 250,000 indirect and direct jobs annually.
Last fall, the institute said government's planned 18-month transition process to replace the HST threatened the potential creation of 8,000 construction jobs and more than 2,000 residential housing units.
UDI president Don Forsgren said in October that thousands of residential building units were on hold, with more expected, prompting the industry to lobby the Liberal government to implement a transition strategy to minimize the HST's impact on new home purchases.
Mr. Falcon rejected comments from critics who suggest the government should be able to dump the entire HST by April 1 this year.
“I can't agree with those who say, ‘Gee, it took 11 months to get into this thing, I don't think it should take any longer to get out,“’ said Mr. Falcon. “When you are going backwards, this is uncharted territory. It takes time to do it right.”
Opposition New Democrat Leader Adrian Dix has frequently said the government appears to be stretching out the HST transition period.
Mr. Falcon also said the HST changes also apply to buyers who purchase new vacation or recreational properties priced up to $850,000 and located outside of the Greater Vancouver and Victoria area regional districts.
The government change to the HST, a blending of the PST and the five-per-cent federal goods and services tax, was announced by then-premier Gordon Campbell and his then-finance minister Colin Hansen shortly after the 2009 election.
Anger over the implementation of the tax set off a province-wide referendum, and the tax was voted down last year.
The B.C. government announced last month that it had worked out an agreement to pay back the $1.6-billion the federal government paid to the province in transition money.
While the province has to pay all the money back, it's getting a $118-million break on interest and will be able to repay the money in instalments over five years.