The Guide | Buying New Construction

The idea of a brand spanking new home with all the latest and greatest is very appealing to the average buyer. Turn key, pristine condition and the most current design trends. The comfort of a new home warranty, with the knowledge that you shouldn’t have to worry about expensive upgrades that are more common issues in older homes (roofing, perimeter drains, asbestos, Poly B plumbing, windows, etc). They’re often located in a new development of like-quality homes. The comfort of great resale in the near years to come. It will be built to the latest building codes and will be more energy efficient than an older home.

But there are elements to the process that some people find daunting. It is not quite the same process as buying a ‘used’ home.

1. Goods & Services Tax (GST)

   Like a car, computer or cup of coffee, this purchase will have GST owed. The standard practice in town tends to have builders listing their homes non inclusive of this Provincial tax. Meaning, if the MLS price says $699,900, expect to pay another 5% on top of that come completion day.

   BCREA does have a page dedicated to tax calculations (which should always be verified by your lawyer/notary/accountant).

2. Property Transfer Tax (PTT)

   Here’s the good news! One of the expenses involved with buying a home, strata or vacant property in British Columbia is Property Transfer Tax (our “Bring Cash” BC Tax). Read more on this government page about the exemption from this tax when you purchase a new construction home on vacant land. The calculation for this tax is 1% on the first $200,000 and 2% on the balance. So, although you are paying GST, you are not paying PTT if you meet the qualifications for the exemption.

   To qualify, the property (land and improvement) transfer must be registered at the Land Title Office after February 16, 2016 and you must be:

   • an individual

   • a Canadian citizen or permanent resident

   and the property must:

   • be located in B.C.

   • only be used as your principal residence

   • have a fair market value of $750,000 or less

   • be 0.5 hectares (1.24 acres) or smaller

   You may qualify for a partial exemption, if the property:

   • has a fair market value greater than $750,000 and less than $800,000

   • is larger than 0.5 hectares

   • has another building on the property other than the principal residence

3. New Home Warranty

   This regulation has helped offer peace of mind to a purchaser for the years to come. This warranty runs with the home and is regulated by the Homeowner Protection Office (HPO).

   At a minimum, home warranty insurance coverage includes:

   • 2 years on labour and materials (some limits apply)

   • 5 years on the building envelope, including water penetration

   • 10 years on the structure of the home

   It is a very important distinction to make if the home is protected by a Third Party Provider via the licensed builder, or if the home was an Owner Builder.

   Owner-Builder authorization allows an individual to build a home for their own personal use without being licensed or arranging for home warranty insurance. They can live at the home, and then when they sell, they are liable for the 2/5/10 warranty coverage. Before offering this home for sale, the Owner Builder must provide you with an Owner Builder Disclosure Notice within the first 10 years of occupancy date. They also must have personally occupied the home for the first year.

   The builder will provide you with more information, but you can search homes that are already complete on the HPO online registry.

4. Inclusions

   Extras can add up on the purchase of a new home. Be very clear from the beginning what is included and what will cost you later. Things such as:

   • landscaping (grass, garden beds, trees)

   • irrigation

   • fencing

   • blinds

   • appliances

   • mirrors

   • garage door electric openers

   • shower doors

   • retaining walls

   • poured patios

   If the home is not yet complete, make sure to have a walk through with your Realtors and the Builder present to make sure you have a clear understanding of what the finished product will be like (ie. will there be carpet/tile/laminate/lino/hardwood and where?). A specification sheet provided by the Builder should clear up most of your questions.

If you are unfamiliar with the builder, ask to see photos of previous builds and for referrals from past buyers.

Check out our past blog post on the cost to purchase for more information on the expenses involved with buying local real estate.

We hope this information was helpful to you. Our team currently has 4 new construction homes listed and ready for quick possession. Our builders also have other lots and leads on vacant land for custom homes. We’d love to connect you with them. Contact us to be put on our email list for all local new construction listings and sales.