TORONTO - Ontario residents shopping for a home next year will face mounting charges as the provincial government harmonizes the GST and provincial sales tax, and that could force some buyers to put their plans on the back burner.

So in a way, Grace Sorgini dodged a financial bullet when she and her fiance signed a deal for a new home last year worth nearly $530,000 in Woodbridge, Ont., a suburban community just north of Toronto.

On Thursday, the Ontario Liberal government introduced in their 2009-2010 budget a plan that to blend the federal GST with the provincial sales tax. On new homes, where GST is already included, that will apply another eight per cent provincial tax to houses worth more than $500,000.

New homes worth under $400,000 will not face the additional tax, while those between $400,000 and $500,000 will pay the tax but get a rebate.

Sorgini believes that if she was buying her home in the summer of 2010, when the blended tax is introduced, she wouldn't be able to afford it.

Under the new tax structure she'd be paying nearly $48,000 more for her home once factoring in the extra taxes, land transfer charges and numerous other fees associated with a typical move.

"It would've changed all of our plans, for sure. It would've changed our lifestyle completely," she said.

The 36-year-old legal assistant and part-time real estate law clerk entered the housing market last year while making plans for her wedding this October.

"When we were looking prices were still high -- we're talking last year around this time," she said.

But with some careful financial planning the couple managed to come up with an objective that was reasonable for them.

However, if they were making the same decision next July, when the tax comes into effect, their bill would climb another $40,000 based solely on the PST applied to the home price.

Add to that another $6,540 from the provincial land transfer tax and about $2,000 from additional taxes paid on lawyers, movers, and other charges.

On the upside, this is the first time Sorgini has bought a house, so the federal government would give her a first-time home buyers' tax credit calculated by on the lowest income tax rate of the year. This year the rebate is $750.

Overall, Sorgini would've paid about nine per cent more for her home in 2010 than she did last year.

"We probably would've stayed out of the market, maybe lived with family for a year or two, saved up and then bought," she said.

Many priced out

Sorgini is one of the lucky few who could still contemplate the same home price, according to Jeff Mayer, an agent at Mortgage Intelligence, a Toronto-area mortgage broker. He said many people will have to scale back those dreams.

"Lenders are being a lot more strict with regards to looking at their debts, credit and so on," he said.

"It's going to push more people to struggle to be a home owner."

Mayer estimates that of about 75 clients he deals with each month, 30 per cent won't be able to afford the proposed harmonized tax increase.

"The reality is people are looking at their RRSP and dollars in their pocket, and buying a house," he said.

"People's income hasn't increased, and with the market the way it is, asking for a raise is not going to happen."

Ontario buyers might have to consider other ways to come up with the extra money required by the new tax payments, suggested Mark Youngman, a real estate lawyer at Gasee, Cohen & Youngman in Toronto.

"The bottom line is people are going to have to (increase) their down payment," he said.

"Getting a second mortgage is impossible, and if you've just got a huge mortgage, chances are the bank isn't handing out a line of credit too quickly."

Industry representatives were critical of the government's budget on Thursday, calling it poorly timed considering that the Canadian housing market is in uncertain territory.

Earlier this month, Canada Mortgage and Housing Corp. said housing starts fell for the sixth straight month in February, down 12.3 per cent to a seasonally adjusted annual rate of 134,600 units. That's after falling 10.9 per cent in January.

Statistics Canada has also reported that new home prices dropped 0.8 per cent in January compared to a year earlier, caused by a price tumble in Western Canada.

It was the first year-over-year decrease across the country since January 1997.

Meanwhile, the U.S. housing market has crumbled to a historic low, intensifying a recession that has wiped out millions of jobs in the world's biggest economy.

"The timing of this tax is lousy at best," said Toronto Real Estate Board spokesman Von Palmer after the budget Thursday. "The reality is that the timing is never good, but this is bad."

Gov't defends move

Under the harmonized tax, resold homes are exempt from the sales tax on their value, but buyers will still face higher taxes on all the costs associated with closing the deal.

The provincial government was quick to note that 73 per cent of homes bought in Ontario last year were resales, which means that the majority of buyers won't be slapped with the entire tax plan.

It also noted that 20 per cent of the new home sales fall below the $400,000 threshold, which means they will only be subjected to taxes on movers and lawyers.

In their estimate, the government suggests eight per cent of homes sold last year would face the new tax or receive a partial credit.

Alicia Johnston, press secretary for Ontario finance minister Dwight Duncan, said that homebuyers should see a benefit from lower corporate taxes.

"Businesses will save costs on their inputs, so for example they're not going to be taxed on lumber, so think of what that does to the price of construction on a house -- it's going to reduce it," she said.

"A lawyer or any other business person who's going to be benefiting from a single sales tax is saving costs, and those costs should be passed onto the consumer."

In Toronto, homebuyers face an additional city land transfer tax introduced last year that taxes homes under $400,000 by one per cent, and homes over $400,000 by two per cent.