B.C.’s harmonized sales tax will drive up the cost of buying a house by thousands of dollars and buyers in pricey Metro Vancouver will be hit hardest.

The increase in tax paid on a typical new single detached house will range from one to three per cent in the Lower Mainland, according to an analysis by the B.C. Real Estate Association.

The 12 per cent HST merges the five per cent GST and seven per cent PST, which wasn’t previously charged on new homes.

The average single detached house that sells for $896,000 in Metro Vancouver will have more than $107,000 in HST tacked on to the price.

That replaces nearly $45,000 in GST previously paid while the HST hit will be reduced by a $20,000 provincial rebate. Builders can also get an “input credit” on the PST paid on materials, estimated at $18,000.

Assuming those rebates are passed on to buyers, the net increase in tax paid will still be $24,840 on that average Metro Vancouver house.

In the Fraser Valley Regional District, an average $548,000 house will trigger $65,840 in HST and the net increase in tax after rebates will be $7,400, according to the BCREA’s analysis.

The province has pledged to provide the $20,000 rebate to ensure homes worth $400,000 or less don’t cost any more in tax under the HST.

But Fraser Valley Real Estate Board president Paul Penner says virtually every single-detached house is above that level and will cost more under the HST.

The more a property costs compared to the $400,000 threshold, the greater the HST impact.

“It’s the top end of the market where the HST is going to have its biggest impact,” Penner said.

“This is not what we need when we are in the genesis of a recovery in the new housing sector.”

The HST on new homes is on top of the Property Transfer Tax, which adds a further $9,000 to $16,000 to the cost of a typical detached house in the Fraser Valley or Metro Vancouver, respectively.

The B.C. Real Estate Association is urging Victoria to reduce or eliminate the PTT to help offset the impact of the HST.

“It’s been an absolute cash cow for the government,” Penner said, noting Victoria raked in more than $1 billion from the transfer tax last year, most of it from the Lower Mainland.

Realtors also want Victoria to allow a larger provincial rebate.

Greater Vancouver Home Builders Association CEO Peter Simpson said some of his members believe the province has overestimated the PST input credits that would offset the impact of the HST.

He says they believe the PST credits are worth closer to one per cent of a home’s value, rather than two per cent as estimated by the government.

That would mean the HST’s net impact on Fraser Valley and Metro Vancouver new houses would ultimately be $5,500 to $9,000 more than the BCREA’s calculation, which used the government estimate on PST credits.

“I haven’t spoken to one home builder who welcomes this,” Simpson said. “I haven’t spoken to one buyer who welcomes this.”

All home buyers – even those purchasing resale homes – will also pay more because the HST will effectively add seven per cent to purchase costs such as the realtor commission, property inspection, appraisal and survey certificates. Lawyer or notary fees have already been subject to the full 12 per cent.

Home owners with no plans to move who opt to renovate will be hit up for an extra seven per cent by the HST on the cost of any contractors they hire.

That will be a huge incentive to conduct renovations in cash, under the table, Simpson said.

“It shifts more activity into the underground cash economy,” he said. “The HST tips the field steeply away from legitimate contractors.”

That will actually cut into government tax revenues, he noted, as well as raising a variety of other implications.

Renovations done in cash tend to skip building permits and inspections, raising potential safety risks.

An accident during construction won’t be covered by WorkSafe BC.

“If somebody does a faceplant off a ladder on your property, you are deemed to be the contractor,” Simpson said. “You are liable for everything.”

While the HST kicks in next July, Simpson figures the window of opportunity for B.C. to change course closes next month when key agreements with Ottawa are completed.

The HST may also trigger rent inflation.

The Tenants Resource and Advisory Centre (TRAC) warns apartment building owners will pay an extra seven per cent on heating, maintenance and renovations.

“If landlords’ costs go up, it will be passed on to the tenants,” said TRAC executive director Martha Lewis.