Good News for First Time Homebuyers
Reflecting the new reality of buying real estate in British Columbia, where the average home is now over $500,000, the government has increased the exemption amount by $50,000 from $425,000 to $475,000 for first time homebuyers! This is a huge benefit, as so many homes will fall into this price category, and will save buyers roughly $7,000 in taxes at the time of purchase.
There is also a $50,000 increase in the partial exemption, which has been increased from $450,000 to $500,000 on properties larger than .5 hectares and that have a secondary building besides the principal residence.
To qualify for an exemption from the BC property transfer tax, at the time the property is registered you must:
• be a Canadian citizen or permanent resident
• have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
• have never owned an interest in a principal residence anywhere in the world at any time
• you have never received a first time home buyers’ exemption or refund
and the property must:
• be located in B.C.
• only be used as your principal residence
• have a fair market value of:
◦ $475,000 or less if registered on or after February 19, 2014
• be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption from the tax if the property:
• has a fair market value less than:
◦ $500,000 if registered on or after February 19, 2014
• is larger than 0.5 hectares
• has another building on the property other than the principal residence
History of the BC property transfer tax
When the province first introduced the Property Transfer Tax (PTT) almost a quarter of a
century ago it was difficult to foresee the tremendous economic growth or the high cost
of housing that exist today in British Columbia.
First introduced in 1987 by the Social Credit government of William Vander Zalm, it was
conceived of as a tax on the wealthy. It was believed that the 1 percent tax on the first
$200,000 on the cost of a home was modest and that the 2 percent tax over that would
apply to only 1 in 20 buyers.
But times have changed and the exact opposite is now true. In 2009, the 2 percent levy
applied to more than 88 percent of the homes sold in British Columbia (even more today, 2014). The wealth tax has become an unfair tax that inflates the cost of housing, erodes affordability
and discourages labour mobility.
In the city of Vancouver, house prices have skyrocketed over the last 25 years. Whereas
the average price of home in 1987 was under $200,000 – that same property in 2011
costs a breathtaking $760,000.
What might have been considered as a reasonable down payment on a home in 1987 is
today equal to the value of the PTT. That average sale price for home in Vancouver will
in fact cost an additional $13,200 in PTT in 2011.
And every time the house changes hands, the PTT escalates and inflates the cost of the home, attacking affordability and sucking money out the rest of the economy.
Property transfer taxes are often described as the most hated and unfair taxes in
Canada and nowhere in country is the provincial land transfer tax more burdensome
than in British Columbia. In Ontario, the province takes $2,725 on a $300,000 home. In
B.C., the province demands $4,000.
BC ranks worst among all provinces in terms of burden of land transfer taxes on
homeowners. In fact, British Columbians pay 222% more in land transfer taxes per
transaction than the average Canadian and the BC Government levies a PTT rate that is
129% higher than the average for Canadian provinces. Higher property prices are not solely to blame for this scenario; prices in British Columbia are 45% higher than the Canadian average, so the inequitable structure of the BC Government’s PTT adds an additional burden of up to 177%.
Government revenues from the tax have soared from $140 million a year in 1987 to well
over $1 billion today.
This move to increase the exemption is well past due, and is a small measure against a massive structural problem for real estate transactions in BC, but it’s better than nothing!