The impact the proposed BC HST will have on new home purchases is significant after a certain threshold. The original plan set forth by the BC provincial government was to offer anew home HST rebate priced up to $400,000. The maximum HST rebate would have been $20,000, a rebate which was put in place to make the purchase of a new home with the HST system comparable to the PST system. This rebate was not sufficient in the eyes of consumers and the real estate industry, which has led the BC provincial government to announce that it has increased the maximum new home HST rebate up to $26,250. In other words, the rebate would be available for the purchase of homes up to $525,000.

Purchasing a new home priced above this threshold will still entitle the home buyer to a $26,250 rebate, but at that point the rebate does not continue growing with the price of the house. While the $125,000 increase was welcomed by many, critics are quick to point out that the average price of a house in many communities is well above the $525,000 price point. In fact, the average price of a townhouse in West Vancouver is $763,000, or for a new detached home in Metro Vancouver you’re looking at, on average, $1.02 million.

Colin Hansen, Finance Minister, points out that this increase to $525,000 is…

“…above the average new-home price in the province, it will be the highest such rebate in Canada.”

For most rural areas in British Columbia, this threshold increase will cover the needs of the average new home purchase. However, the new HST is likely to have a negative affect on new home sales in urban areas where the average price of a house is beyond $750,000.