Property Transfer Tax – Is it too high?
This tax was brought in by the British Columbia government in 1987. It was introduced in an attempt to slow down the speculation (house price inflation) in real estate that was happening at the time. Subject to a few exemptions, the tax is payable by anyone who purchases property.
Until February 2016, the amount of tax was 1% of the first $200,000.00 of the purchase price, and 2% of the purchase price over $200,000.000. However, when the tax was first brought in, the average home price in Vancouver was $147,000.00. The idea was that by increasing the tax to 2% for values over $200,000.00, speculation would be reduced and home prices would be kept down.
There is also a first time home buyers exemption, but it is only for homes under $250,000.00. for properties in the range of $250,000.00 to $450,000.00, there is a partial exemption. For properties with a value greater than $450,000.00, the first time homebuyers exemption is forever lost.
There have been some changes effective February, 2016. As of February, the amount of tax is 1% on the first $200,000.0, 2% on the amount between $200,000.00 and $2,000,000.00 and 3% on the amount over $2,000,000.00. There is also a new exemption for newly built homes. It has no application to used residential housing or to newly built homes with a value over $800,000.00.
What most people do not realize, is that the percentage rates for properties under $2,000,000.00 have not been adjusted since 1987 (except for a few minor increases in the first time home buyers exemption).
So, as a result, when the tax was first introduced, the vast majority of home buyers paid only 1% of the purchase price as tax. Also, the vast majority of first time homebuyers were exempt from the tax (since so many homes were under $250,000.00). In 2015, the vast majority of home buyers are paying 2% tax on most of the purchase price, and very few first time home buyers qualify for the full (if any) exemption. The “new” 3% tax on properties over $2,000,000.00 is (as it was in 1987) a further attempt to reduce speculation. However in raising the tax on these values, there was no adjustment made to the 2% payable on houses valued from $200,000.00.
Is that reasonable??