Last week, the Newfoundland provincial government announced a two per cent increase in its harmonized sales tax (HST) as part of its budget. The HST is a harmonized sales tax that combines the PST and the GST. Most of Eastern Canada has blended the two taxes, while the west has kept them separate.
This two per cent increase is estimated to add more than $6,000 to the cost of a $300,000 home in St. John’s. This may prove to be particularly profound for first-time home buyers.
The HST increase will also impact the renovation industry in Newfoundland. In an already healthy underground market, the ability for the tax cheat to further distance themself from the legitimate tradesperson will become even greater. It is conservatively estimated at least half of all renovation projects in Atlantic Canada are not declared. This puts honest businesses and consumers at risk.
In April, 2013, the Manitoba provincial government increased the PST from seven per cent to eight per cent.
It may just be coincidence, but new home starts throughout the province fell by 17 per cent in 2014. They continued to decrease in 2015, albeit at a lesser rate. There were numerous other economic factors in play over the course of those 18 months from the time the PST increase was announced, but a drop in starts of that magnitude cannot be underplayed.
All indications are new home starts for 2016 should remain level before hopefully experiencing some form of growth in the following three years. A commitment by the incoming Progressive Conservative government to eliminate the one per cent PST increase within the next four years should further buoy the housing and renovation market and make purchasing a new home more affordable for Manitobans.
It’s never as simple as just one factor when looking at consumer costs. Affordability can only be enhanced when all cost factors are taken into consideration.
Mike Moore is president of the Manitoba Home Builders’ Association.
