The B.C. Real Estate Association will be making a fresh appeal next Tuesday for the provincial government to lower the Property Transfer Tax.
The association, representing the province’s 18,500 realtors, will make its case during pre-budget consultations by a government committee.
This will be the fifth consecutive time the BCREA is making such a plea. And it appears this may be the year the advice is heeded.
The push for a lower PTT comes amid rising frustration in Vancouver over prohibitive house prices and mounting evidence of tax avoidance and evasion by foreign property buyers.
Locals have every reason to be apoplectic at the high taxes they are asked to pay in relation to home ownership when it is so obvious that a sizable and identifiable group of buyers are not paying their fair share.
Finance Minister Mike de Jong hinted last week that changes to the PTT are pending. The betting is the changes will be modest and directed mainly at first-time buyers.
The BCREA’s September Bulletin states the transfer tax “places an increasingly unfair burden on homebuyers.”
The widely reviled tax is based on one per cent of the first $200,000 of a property’s selling price, plus two per cent on anything above that.
So, for example, the proverbial $1.1. million fixer upper would trigger $20,000 in PTT.
BCREA’s recommended fix: Increase the one-per-cent threshold from $200,000 to $525,000, with two per cent payable on the balance of a property’s value. And index the one per cent application thereafter to the MLS Home Price Index, with adjustments made annually.
This would not make Vancouver homes affordable, but it could help. And, appropriately, help more than just first-time homebuyers.
Affordability challenges have grown so severe in this region that those needing help extend well beyond just the first-timers.
The PTT, all but impossible for ordinary homeowners to avoid, has become a cash cow. The finance ministry, like a heroin addict, is hooked on this revenue that just keeps on giving.
Premier Christy Clark herself has called the transfer tax “a drag” on the economy, stating last February: “It is absolutely part of our long-term plan to get rid of it because it is not good for affordability in B.C.”
But last month de Jong revealed that PTT revenues ran 40 per cent ahead of the province’s forecast for the first quarter of fiscal 2015-2016. And, without that cash surge, B.C.’s budget might have gone into deficit. De Jong expects transfer tax revenues to hit a record $1.1 billion for the year.
The reason for the bonanza? Soaring house values. Yet the tax is based on the same percentages set in 1987 when the tax was introduced and when 95 per cent of Vancouver-area homes cost less than $200,000.
With the 1987 pricing levels, it was not onerous to ask one per cent on the first $200,000 of a home’s price, and two per cent on the balance. Consider that in 1987, the average detached home in East Van was $119,762, or on the West Side, $261,217; condos were $50,069 and $109,230 respectively.
These days, a typical detached home in Metro Vancouver sells for $1.159 million.
The very same problem — excessively high percentages — also applies to realtors’ fees, which also negatively impact affordability.
Returning to that same $1.1-million fixer upper, typical realty fees on such a home would total $33,570. Just as the Property Transfer Tax percentages have never been appropriately adjusted downward to account for the huge price increases that have taken place over 25 years in the Lower Mainland, so the percentages applicable to realty fees have never been adjusted downward either.
The realty association is urging that percentages be recalibrated for the purposes of the transfer tax. But, of course, is silent on realty commissions.
Sadly, it is clear, the various parties involved are motivated by self-interest. But who is speaking out for the poor sods aspiring to buy a home in Vancouver?
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