Earlier this week the federal government announced the reduction of the GST to 5%.
What does this mean to the home buyer and seller?
Specifically for New Home Buyers, their savings are quite significant. A full percentage point means home buyers will save upwards to $3,000 on a $400,000 home. There are times just a couple thousand dollars can make or break a deal - this kind of savings will definitely help many of the first time buyer's out there on a tight budget.
According to research by the Canadian Real Estate Association (CREA), the average Canadian spends close to $7,500 on home renovations and another $4,000 on new furniture and appliances when they buy a home. This means they will be saving just over $115 based on these averages.
When it comes time to sell your home, a home owner will save an additional $175 of GST on Real Estate Commissions based on industry average remuneration on a $450,000 home.
The CREA has further recommended to the federal government to increase the personal maximum withdrawal allowed under the Home Buyer's Plan to $25,000 - up from $20,000. This will help keep up with current inflation levels.
As well, they have also suggested the government amend the Income Tax Act to provide property investors the ability to changes asset classes without financial penalties they currently face. Under this proposal, investors would be able to defer the capital gains tax and the capital cost allowance recovery on the sale of an investment property when these funds are re-invested within a specific time period.
Regardless of the proposals made by CREA, the current changes to the GST will certainly bring positive results and savings to both home seller's and buyer's.
For more information visit http://www.fin.gc.ca/news07/07-083e.html