If you could see into the future, how would you prepare for it?

So you’ve heard me ramble and post about the HST doomsday for new homesales, and it goes in one ear and out the other. How about I give you my interpretation about how this could open an opportunity for you?

Here is what I am thinking: we both know that many people buy a new home pre-construction to save some money (builders, like most people after all, want money ASAP), and what they do is buy it bare bones, get in while the area is still being developed and do the upgrades themselves, thus saving them the margin that builders make on doing the work in-house. They then put the house on the market at the same time as the rest of the ones in the development, but now the margin made on the improvements goes in THEIR pocket and not the builders. Simple enough.

Can you imagine what will happen to these new homes once HST kicks in? HST is PST and GST combined and is set to hit us in January. So instead of now buying a 300K home and paying 15K in GST ON TOP of the price (300K + 5%), but now you would pay the additional 8%, so 24K, making your total 339K (300 + 5% + 8%)! Can you imagine???

How do you think the market will react? For one, now that new home sales are going to cost 8% more, you could argue that all RESALES could be sly enough, all things remaining the same,  to start asking for as much as 7.99% more and be considered a relative bargain (albeit a slight one).

But what the new homes are going to do is drop their prices, naturally. They need to liquidate their homes and pay their obligations, and people are going to go shop at the 7.99% increased resale ‘bargain bin’ to get what they need. Im guessing they will offer all kinds of incentives to purchase their homes as well.

What I think will happen is that in expectation of the looming HST, and given that no one can predict with 100% certainty how the economy will be in the spring, new homes will drop even further this fall/winter. ON TOP OF THAT – money is CHEAP right now. Our in-house broker John Walsh just emailed me new 5 year fixed rates at 4.02%!!!

Where I see a huge opportunity: Take advantage of CHEAP money and LOW prices on new homes in the fall, buy bare bones, upgrade it yourself, and then throw it on the market in the Spring as a RESALE comparable to its neighbouring NEW HOMES and not only put the upgrade margin in YOUR JEANS, but provide the added incentive to the buyer by not requiring them to pay the blended tax rate since your home is not a NEW one anymore (resale now) and thus GST, or by then HST, will NOT BE APPLICABLE.  WIN/WIN!!!

Hey – why not be sly yourself and increase your margin by %7.99 and get in the ‘bargain bin’ with a practially new home?

My idea of an opportunity.

Heck, I would do a 9 month business plan on this, map it out in a project format, get some quotes and commitments, go to a lender and finance a half dozen of these babies over the winter.  There a risk/reward possibility and a half.

So we know its going to happen in Jan – the question is: What are you going to do about it?