HST timing impetus to buy now in B.C.
As a developer, Dave Rae’s job is his life — his bread and butter. That’s why he wants to help buyers in the wake of B.C.’s decision to introduce a Harmonized Sales Tax (HST) on July 1.
“Delaying the decision to purchase recreational property this year will cost buyers thousands of dollars,” he says.
As the principal in Columere Park Developments, Rae and his wife, Donna, are trying to offset some of the financial impact of what B.C.’s development industry is calling an ill-timed tax decision.
Sam Boguslavsky runs a bigger ship under Sable Developments, which includes Sable Resorts and its Legacy on Mara Lake development. But he is in full agreement with what the Raes are saying and he has his own strategy for dealing with it.
The HST, which is also being introduced by Ontario, combines the provincial sales tax with the federal GST.
In the case of B.C., the HST will be 12 per cent — and there will be no rebates for recreation properties.
Rae is developing Spirits Reach, a 200-hectare lakeside community on Columbia Lake just south of Fairmont Hot Springs, B.C.
The location of Spirits Reach in the heart of the Columbia Valley, a favourite playground for Calgarians, has made it a popular second-home destination for many from the eastern side of the Rockies.
To date, the majority of buyers have come from Calgary and other centres in Alberta. Interest has also been received from the United States and England, says Donna.
Boguslavsky also looks to the east side of the Rockies for much of his business.
“Albertans are big consumers of B.C, ski chalets, resort condos and lakeside cabins,” he says. “This new tax will directly impact them, especially because the HST does not offer a rebate for recreational properties.”
It’s on those consumers the Raes and Boguslavsky will focus their businesss strategies.
“If you’re on the fence about purchasing property right now, delaying that decision means you’ll be paying tens of thousands more for the same product,” says Dave. “It’s money that doesn’t build equity in your investment, but goes straight to government coffers.”
As part of its HST campaign, Spirits Reach is providing an incentive to purchase by reducing prices.
Dave offers the example of an a 1,800-square-foot, three-bedroom, 2 ½-bath home at Spirits Reach.
The home is priced at $519,000 (reduced by $150,000 from the former price) plus five per cent GST for a total of $544,950.
With the inclusion of the extra seven per cent from the HST, the price climbs to $581,280.
“Making the decision to purchase before July 1 will save buyers $36,330 on this property,” he says.
But the added cost of the HST doesn’t end at purchase. Monthly mortgage payments and total inter- est paid will go up as well.
With a down payment of 25 per cent for a current one-year fixed mortgage — at an interest rate of 3.4 per cent and a 20-year amortization — the HST will cost buyers an extra $155.99 per month.
That’s an extra $10,263.72 in interest over the life of the mortgage on this property.
Combining the savings offered by Spirits Reach, the pre-HST savings and the interest savings, buyers who purchase before July 1 will save a total of $196,593.72.
“Making the decision to purchase a second home is a big one, but the numbers clearly show that waiting until after July 1 will increase the financial commitment and reduce the investment potential,” says Dave. “The goal of our price adjustments is to help our homeowners build equity, instead of paying taxes.”
Homes in Spirits Reach’s lakefront neighbourhood, Spirit of the Lake, range from $489,000 to $699,000.
The Raes are developing the land to accommodate 400 homes on property their company owns on both sides of Highway 93/95.
Activity is currently centred in the Spirit of the Lake neighbourhood, where 11 of 34 lakeside homes remain — with phases two and three set for release this year.
Three other communities are on the west side of the highway.
Hardie Creek Cabins is slated to be released next year and Mustangs Crossing is expected to come to market in two years, with Spirits Rise in three years. A large recreation centre is to open in five years.
Boguslavsky says that with Legacy on Mara Lake residences priced from $300,000 to more than $1 million, buyers can save between $28,000 and $70,000 if they purchase before July 1.
The first phase of the $50-million, 160-unit project has been completed. Work on the second phase of 95 units won’t begin until the first phase is sold out.
To date, fewer than 20 remain. They range from $300,000 to more than $1 million and measure from 600 to 2,000 square feet.
Dave and Donna Rae of Columere Park Development, which is constructing Spirits Reach.
CRANE TAKES FLIGHT