Adverse effect of the land transfer tax

Every month, WinnipegREALTORS®  tracks the performance of the different property types that make up the MLS® system. Since residential-detached (commonly referred to as single-family) homes make up roughly three out of every four MLS® sales, it is understandable that more attention is placed on this common property type. 
Even in the case of condominiums, which have experienced notable sales increases in recent years, their total MLS® share only represented 12 per cent of the market as of the end of July 2011. The proof of how condo sales have shown remarkable gains is that the 971 sales to-date are equal or better to all the condo sales in 2005 and the years previous.
After condominiums, vacant lots are a distant third with 314 sales this year, which is four per cent of total MLS® sales. Vacant lots are followed by single-attached sales of 274. To round out the top-five property types, duplex sales of 133 are less than half of all 
single-attached sales.
Of course, when we look at the different property types, we are also interested in seeing how average prices are relative to each type, as housing affordability becomes more of an issue in our local market. In the 2011 WinnipegREALTORS® spring membership survey, 68.4 per cent of the respondents said they feel housing affordability is becoming an issue in finding a home that buyers want.
The alternative to higher house prices is opening up your search criteria to include more affordable neighbourhoods, lowering your expectations on the exact house you want, or even considering a different property type. This is especially true for first-time buyers who do not have the equity build-up that existing homeowners possess.   
Prospective buyers in our local housing market at least have alternatives to consider, while in other more expensive housing markets, options can be very limited, to nonexistent. 
What is starting to emerge this year and became more apparent in July is what was referred to in the WinnipegREALTORS® 2011 January forecast speech as a “flight to affordability.” 
“The Winnipeg Jets may be taking off too, but in the real estate market the alternative flight path and clearly more affordable offerings of condominiums and single-attached homes in contrast to residential or single-
family detached is as real as a Goog at the BDI,” said WinnipegREALTORS® president Ralph Fyfe.
In July, condominium sales were up 23 per cent, while single-attached residential properties rose an astounding 76 per cent. As well, year-to-date numbers are impressive. The former are outpacing last year’s sales at this time by 10 per cent, while the latter, or single-attached, are up 16 per cent. Residential-detached property sales have increased less than three per cent for the year and just over one per cent for July.
The spread between the year-to-date residential-
detached average sale price of $256,000 and the average sale price of condominiums and single-attached is $54,000 and $63,000, respectively. 
Not only are these two alternative property types more 
affordable, the highest land transfer tax in the country — at two per cent for purchaces over $200,000 — does not apply at all, or very minimally, if a buyer pays the average price. For every $50,000 in value above $200,000, the provincial government collects $1,000 from the home buyer before they can take title to their new property.
For buyers of residential-detached homes in the southwest and southeast quadrants of Winnipeg, where the average sale price this year is above $300,000, this means they are paying at least $2,000 more in land transfer taxes as a result of the two-per-cent land transfer tax rate. This is in addition to the $1,650 paid for a house priced at $200,000, plus another $75 to register the title at Manitoba Property Registry.
WinnipegREALTORS® is calling on Manitobans at to tell the provincial government they need to reduce the unfair burden of the Manitoba land transfer tax on property buyers. Based on what would have been paid for an average priced home in 1987, when the tax was first introduced, and what is now paid to buy an average priced home, land transfer taxes have gone up tenfold.
The impact of the land transfer tax is more acute with first-time buyers. Every after-tax dollar they save is critical for their required down payment and closing costs, including the Manitoba land transfer tax. 
Moreover, with Winnipeg and other Manitoba cities having the lowest rental vacancy rates in the country, would it not be desirable for the government to encourage renters to own their first home and thus free up badly needed rental units? 
B.C. and Ontario have in place generous first-time home buyer land transfer tax exemptions. The two provinces clearly recognize how difficult it is for a first-time buyer to come up the necessary down payment and closing costs to acquire a home. 
Let’s not forget about other home buyers, who may be purchasing their second or third home, and are absolutely stunned when faced with thousands of dollars in land transfer taxes.
Fortunately in our local market, there are other property types that enable home buyers to avoid being hit with the punitive two-per cent land transfer tax rate that kicks in on any home valued over $200,000.