HST hike a double whammy for N.L. home buyers: homebuilders' association

The fallout from the HST hike could have dire effects on people's ability to both buy and pay for new homes in the province, warns the head of the Newfoundland and Labrador chapter of the Canadian Homebuilders' Association.

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President Sheldon Colbournesaid the hikewill add substantial heft to a house's price tag, heaping another $6,000 onto a $300,000 home, for example.

"It's a huge jump, just overnight, for the cost of a house," Colbourne told CBC's St John's Morning Show, adding the most lucrative sector of the marketpeople saving for their first home is worst off.

"That's where it's going tohit the hardest. First time home buyers are the biggest part of our market, always has been."

Double whammy

In last Thursday's budget, the Liberals announced the province's HST rate will go from 13 to 15 per cent,a hike the party had campaigned against before coming to power in November.

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Colbourne said the budget hits homebuyers not only on the initial price tag of a house, but their ability to afford mortgage payments.

We really do think it's going to help stall the housing market.- Sheldon Colbourne

"If you're paying more taxes, more fees, you have less income to be able to put toward that," said Colbourne.

"We really do think it's going tohelp stall the housing market."

Colbourne said his association has approached the province about alternatives to the HST hike, but their ideas were ignored.

What to charge?

With the HST increase only going ahead as of July 1, Colbourne said the province's homebuilders are currently in limbo,uncertain of what percentage oftax to charge.

Colbourne said typically, transitional rules are put in place, but so far the province hasn't given any guidance.

In its absence, Colbourne said homebuilders will most likely begin charging 15 per cent HST immediately, and take it off after the fact if the rules become clarified.

"We almost automatically have to put it on to cover ourselves," said Colbourne.

Black market boom

Colbourne also predicts the tax hike means more people will turn to the black market, and hire contractors willing to work under the table.

"The underground economy is thriving, and we think this is only going to help feed it," he said.

"In past years the underground economy is fairly active in our province, and equates to $6-million of lost revenue."

Colbourne said beside the lost revenue, using such contractors leaves homeowners on the hook for faulty work.