The increased cost of the Manitoba land transfer tax and how it has become a revenue generator for the provincial government is shown by an Excel spreadsheet created by WinnipegREALTORS®.
While only June 2012 and June 2009 are shown, the chart tracks all monthly revenue the province derives from MLS® single-family home sales over the past few years.
The breakout of price ranges coincides with the rates levied by the province on the amount a home buyer pays for a home.
There is no land transfer tax levied from 0 to $30,000, but after that amount the rate levied changes as it progresses to higher home price levels. The tax is 0.5 per cent from $30,001 to $90,000, one per cent from $90,001 to $150,000, 1.5 per cent from $150,001 to $200,000, and two per cent for any amount over $200,000.
If you buy a home at $200,000, the land transfer tax works out to $1,650. On increasing increments of $50,000 ($250,000, $300,000, $350,000 etc.) you pay an additional $1,000 based on being taxed at the highest land transfer tax rate in the country of two per cent.
For the average home purchased in southwest Winnipeg in June 2012, where the average price was a little less than $350,000, the government receives $4,600 plus a property registration fee of $70.
The 0 to $30,000 exemption bracket has become irrelevant in 2012, since there are virtually no sales between these prices. When the land transfer tax was introduced in 1987, and the average home price was approximately $80,000, this exemption did provide relief to those buying lower-priced homes. It could also be viewed as a first-time home buyer exemption.
B.C. and Ontario provide generous first-time home buyer exemptions on their land transfer taxes.
Given rising home prices, the over $200,000 price bracket taxed at two per cent tax rate has grown significantly, even in the last four years when comparing 2009 to 2012. While there were 39 more home sales in June 2009 over June 2012, for sales over $200,000, there were an additional 220 in June 2012. The difference in revenue collected is significant at $3,280,307 versus $2,118,599, which works out to be a gain of $1,161,708. Overall, it is nearly $1 million over the four-year period, representing a 35 per cent increase.
Note: It is rather unfortunate to see a situation whereby there are less buyers this year and likely a greater number of would-be buyers who were unable to afford a home in June 2012 compared to June 2009, yet the government is still gaining a sizable increase in revenues. Is homeownership seen as more of a privilege, and the government is prepared to sacrifice accessibility for Manitobans wanting to get into homeownership for the sake of collecting higher land transfer tax revenues?
It should be pointed out that what has accelerated the increase in revenues beyond just house price increases since 1987, is the fact that in 2004 the provincial government increased the 1.5-per-cent tax rate to two per cent for any amount of house value over $200,000.
For the first six months, the increase in land transfer revenue from 2009 to 2012 is $5,872,139, which represents a 57 per cent increase in revenue for that period.
Imagine if all Manitobans, not just those buying a home in 2012, had to pay this percentage increase on an important shelter-related item every year. Would their not be a hue and cry over it? Would it not be fairer to cap land transfer tax revenues and give something back in relief to those buying homes?
And let’s be clear, there is not a lot of speculation in the local real estate market, so most purchases are by Manitobans needing to address their shelter needs to enjoy a better good quality of life for themselves and their families.
Should there not be a modicum of fairness to realize these sort of increases are shameful and need to be addressed?
One more good example of the burden of the tax comes from comparing May 2012 to May 2009. May usually is the most active real estate month of the year and therefore brings in the most revenue for the government. The difference in revenue from 2009 to 2012 was just under $1.7 million with the latter year pulling in over $4 million.
What is also most striking is the marked change in sales for over $200,000 for that period. Sales in May 2012 represented almost 80 per cent of total home sales, whereas, in May 2009, they were 52 per cent of the total. You can now appreciate how much government revenue has gone up with a two-per-cent tax rate applied on any amount over $200,000.
For more information on Manitoba’s land transfer tax, go to 2muchltt.com. A new addition to this website by WinnipegREALTORS® is a land transfer tax calculator. Click on it at the top left-hand corner of the page and you can find out what land transfer tax you will be required to pay by plugging in the price of the home you are considering to purchase. It will automatically tell you what the total amount of the land transfer tax levied on the purchase.
At the website, a new video provides a good background on the original intention behind the tax, and how it has over the years become a far greater expense to and a burden on home buyers.