By: The Goldfellas

Budget 2022: Mandatory HST On New Condo Assignments

Tags: GTA REAL ESTATE, TORONTO NEWS, REAL ESTATE UPDATE, BUDGET 2022

Property speculation is targeted in the recent federal budget and could potentially impact the market for pre-construction condominiums.

In an attempt to reduce so-called speculative trading in the Canadian housing market, the government has plans to target the resale of purchase contracts for pre-construction homes. 

As it stands now, HST may or may not apply to the purchase of a new home assignment, depending on the reason for purchasing the home (ie. if the buyer intends to live in the home, they are exempt from HST). This provides opportunities for speculators to lie about their original intentions and causes confusion for those involved in an assignment sale as to whether HST applies. It also results in an uneven distribution of HST to the final price of new units. 

To remedy this problem, effective this May 7th, the new budget will apply 13% HST to the price of ALL assignment sales of newly constructed (or substantially renovated) residential housing - from the builder to the first buyer and then again from the first buyer to the second buyer. 

In order for an investor to simply break even, the property’s value would need to increase by the 13 percent HST, five percent real estate commission, and any charge by the builder to consent to the assignment. 

GOLDFELLAS’ TWO CENTS:

This could potentially disrupt the market for assignment sales, but we expect the impact to be temporary. The initial announcement will create an impact & the next few weeks to months will see much more inventory in the pre-construction market (fantastic buying opportunity!). However, before long, the additional 13% will be built into the purchase price on both ends and we expect the market to absorb the impact due to the strong underlying demand. 

 

 

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