A very interesting article by Barbara Yaffe in the Vancouver Sun on October 11, 2013
Homebuyers and realtors hate it. Economists disparage it. And nearly everyone agrees, it is time to overhaul B.C.’s Property Transfer Tax.
The 26-year-old levy makes the excruciating task of purchasing a B.C. property all the more difficult, and is an excellent example of how politicians have persisted with policies that ignore Vancouver’s affordability crisis.
The PTT takes one per cent of the first $200,000 of a property’s selling price, and two per cent on the balance.
First-time buyers of properties selling for $425,000 or less are exempt.
Thus, a typical west side Vancouver detached home – now averaging more than $2 million – requires the purchaser to fork over nearly $40,000 in PTT.
And despite the fact that B.C. has the highest home prices in Canada, the province perversely imposes one of the most onerous such taxes in Canada.
Only Toronto has a worse situation, with buyers paying a separate municipal and provincial Land Transfer Tax. Alberta and Saskatchewan are the only provinces without this type of levy.
The Real Estate Board of Greater Vancouver points out that B.C.’s tax, introduced in 1987, “is structured to reflect home prices in the 1980s, not the prices homebuyers pay today.”
It argues the two per cent part of the levy should apply only on property above a threshold of $525,000 in the province, and $600,00 in Greater Vancouver. Moreover, it wants the threshold to be adjusted annually.
B.C.’s growing PTT revenue haul lends weight to the board’s perspective.
In the 1980s and 1990s, B.C. netted $200 million to $300 million a year in PTT. More recently, the take has soared to between $850 million and $1 billion – because the average Vancouver-area home price since 1987 has soared 500 per cent. (PTT revenue last year was $757 million due to a soft market.) Last January, Finance Minister Mike de Jong stated: “We are interested in looking closely at the thresholds, given realestate prices in B.C.”
Eight months later, he’s noncommital: “In preparation for next year’s budget, we will review the provincial taxes and consider any possible changes during this process.”
A May Ipsos Reid poll sponsored by the real estate board revealed 58 per cent of respondents oppose the PTT.
But B.C. hasn’t faced the sort of backlash it did on the HST because the PTT restricts its bite to property purchasers – 150,000 to 200,000 people a year.
Vancouver realtor Doron Grill recently commented on the real estate board’s Facebook site: “The Vancouver market has been butchered by offshore buyers, making it close to impossible for a local to even get into the market …
“The province needs revenue, so I think the offshore buyers should pay, and pay dearly, to invest their money here.”
In other words, a higher PTT for offshore buyers, a lower one for locals – although this could raise legal issues.
Politicians insist the province, struggling to balance its budget, cannot do without this revenue stream.
But economists say the tax discourages the buying and selling of property, a wealthgenerating activity that should be encouraged.
Each property sale generates some $60,000 in expenditures – fees for lawyers, building inspectors, surveyors, appraisers and realtors, plus the cost of appliances, furniture, renovations and repairs.
The B.C. Taxpayers Association opposes the tax because it raises revenue “on the backs of families struggling to buy homes … and on businesses trying to expand.”
Christy Clark’s government wants to make life more affordable for ordinary B.C. families. Reducing the PTT would be a good start.
It is worth remembering, most homebuyers aren’t wealthy – they are just trying to get by in a city where real estate has become mercilessly unaffordable.