The added burden and confusion by purchasers over the Harmonized Sales Tax in Ontario is hurting the housing industry, say realtors.

And it seems some of that could be by association. An Ipsos Reid survey commissioned by the Ontario Real Estate Association and made public Wednesday says that 56 per cent of Ontarians, for example, mistakenly believe that the HST, which was implemented in July, applies to the resale home market.

“There is growing concern that this misrepresentation about the HST is dampening the Ontario housing market,” said OREA president Dorothy Mason.

The association says the provincial government should start a “public awareness” campaign to address the issue.

The HST, which combines the PST and the GST for a total of 13 per cent, does apply to certain parts of the transaction, such as legal and home inspection fees. But it does not apply to the cost of a resale home.

“This confusion means that many buyers think the cost of a resale home is tens of thousands of dollars higher than it it actually is,” said Mason.

Existing home sales were down 17 per cent in the first half of October compared with last year. But analysts say a weakened job market and uncertain economic conditions, with many sales pulled forward in the first half of the year, are the main causes.

But OREA says with sales down, confusion over the tax just adds more problems in a cooling market.

In the new home market, builders have long complaining that sales are grinding down because of the tax.

New home sales in the GTA fell 32 per cent down in September of 2010, compared with the same month last year

On a new home the tax adds, for example, $6,000 on a $500,000 new home – enough money to upgrade to a better kitchen or floors. A $1 million dollar home gets hit with $36,000 in extra taxes.

New homes under $400,000 are exempt.

“The burden of new government regulations and charges have resulted in increasing the cost of home ownership,” said Ontario Home Builders’ president Bob Finnigan.

The provincial government introduced the combined tax this year to make industry more competitive.

The PST was charged on businesses during every step in the manufacturing, distribution and retail process which made it a tax on tax. The Ontario government argued this placed businesses at a competitive disadvantage. But the fix also affected some industries negatively.

The building industry is one of the most visible symbols. Builders claim the HST is not also impacting sales of new homes, but also the renovation industry, making it more costly to fix up homes.

According to a poll by the Royal Bank released Wednesday, renovation intentions dropped by a significant four percentage points to 62 per cent, from 66 per cent a year earlier, according to a poll by the Royal Bank of Canada made public Wednesday.

The bank did not blame the HST for the dip, but it said the absence of the popular renovation tax credit stimulus likely had an impact.

The tax credit was hugely popular, but wasn’t renewed by the federal government.

Builders, meanwhile, say the HST has created a greater underground economy of contractors who do work for cash so consumers don’t have to pay the HST.

According to the RBC poll, more than half of Canadians (55 per cent) used cash to pay for their reno, with credit cards at 38 per cent.

Of those who plan to do a reno in the next two years, the average spend is estimated at $10,796.

The vast majority of Canadians see renovating (92 per cent) as a means to increase the value of their home.

One problem that Canadians seem to have is keeping to a budget. Only half of those polled said they managed to stick within their budget.

“Costs can mount up easily and the next thing you know you’re over budget and behind schedule,” said Patricia Everingham, director of RBC personal lending. “The best course of action is to mount a realistic budget.”

The RBC poll was taken by Ipsos Reid in September. It has an estimated margin of error of plus or minus one per cent 19 times out of 20.

How low can you go to list a property on the Canadian Multiple Listing Service?

How about for free?

Discount real estate brokers have aggressively moved into the Canadian market in the wake of a federal Competition Bureau agreement that opens up the industry to lower fees. But it’s fair to say that the new offerings have hit a new high. Or make that low.

“This will be a game changer,” claims Lawrence Dale, founder of Toronto based Realtysellers Real Estate Inc. “There are no gimmicks. There are no extra fees. Free is free.”

Dale confirmed to the Star that his website realtysellers.ca will launch Wednesday, offering free listings to vendors in the Toronto area. Eventually the company plans a national roll-out.

Details of the launch of the brokerage had been under wraps until an agreement by the Competition Bureau and the Canadian Real Estate Association this week opened up the market. But it will likely be an eye-opener for the industry.

“Consumers have been wanting choice and they’re getting it,” said Dale.

The Competition Bureau deal protects the right of discount brokers such as Dale to simply post the listings of clients without having to offer a range of other services.

But when commissioner Melanie Aitken challenged the real estate industry to open up the market to discount brokers, she likely did not think it would happen this quickly, or go this far.

Discount services with various business models have been launching aggressively. One Ottawa-based company was offering listings for $109. But so far, no one has offered them for free.

“If people only want to list on the MLS and not use other services, we are more than happy to do that,” said Dale.

With more traffic on his website, Dale eventually hopes to bring clients to his other services, which include a 0.5 per cent listing fee for full-service representation.

The new entrant will not be without detractors from the full-service industry.

“I don’t think that business model will work – I don’t see how they will make money in the long run,” said Paul Swartz, a 30-year veteran broker with Sutton Group.

Swartz said private sellers typically end up turning to full service professionals when they realize how difficult it is to sell a home.

“I don’t think anything will really change,” he said. “People still want good service.”

Still, Dale said he will also be able to offer full service from experienced agents because of the volume of deals he expects his company to make.

“The average agent does maybe one deal every couple months. They have to charge higher fees to support that,” said Dale, who has also dabbled in traditional real estate as a co-founder of the group that at one point controlled high-end realtor Chestnut Park.

The back story behind Realtysellers though, is perhaps more interesting than the low pricing.

It was Dale’s bitter battle with the Toronto Real Estate Board and eventually the Canadian Real Estate Association that attracted the attention of the federal Competition Bureau.

The high-profile lawyer, who masterminded the buyout of the SkyDome (now called the Rogers Centre), accused the organizations of enacting rules that ran his original discount company, also called Realtysellers, out of business. The company shut its doors in 2006.

Dale eventually filed a formal complaint to the Competition Bureau, which started an investigation that led to the deal this week.

But it seems the worst nightmare of the established real estate industry is back – and with a vengeance.

The new company is a separate entity with different investors, but Dale said he kept the name because it still holds brand value. Stephen Moranis, a former president of the Toronto Real Estate Board, and a partner in the original company, is no longer involved.

Back then he was offering a listing on the MLS for $299. Now the stakes are much higher, and the market has been significantly changed.

The breakdown goes something like this: On a $400,000 home, a vendor might typically pay 5 per cent in total commissions, or $20,000.

Of that, 2.5 per cent or $10,000 would go to the listing agent, while the buyer’s agent would receive the same amount.

Under a plan offered by a discounter such as Realtysellers at 0.5 per cent for the listing agent, it would cost the vendor $2,000 to sell a $400,000 home. It’s up to the vendor how much he wants to pay the buyer’s agent.

Under new rules enacted by CREA this week, buyer’s agents who bring in a client must be paid at least a penny.

Queen’s University professor John Andrew said the entry of so many discounters, including Dale, likely means the ranks of marginal or under-performing full-service agents would be thinned out as the pickings get slimmer.

“The pressure is on for prices to come down, so some agents won’t be able to support themselves in that environment,” said Andrew, who predicts that discounters will rule the marketplace in the future.

So far that hasn’t been the case in the United States, where a lawsuit by the Justice Department against the National Association of Realtors resulted in a settlement in 2008 to open the market.

After two years, the NAR says that full-service brokers still make up more than 70 per cent of the market. However, industry insiders say it will take more than a couple of years to completely shift the market as consumers become more aware of their options.