Below is an article from our B.C. counterparts that speaks to something WinnipegREALTORS® and the Manitoba Real Estate Association are strongly advocating, which so far has been ignored. The two organized real estate groups made a modest request this year to have the Manitoba government match the federal government’s $750 first-time home buyer tax credit, but no action was taken in this year’s provincial government.
It will cost an estimated $5 million to give first-time buyers some money back on the high land transfer taxes they are paying. The Manitoba government would still be collecting $6 million more this year in additional revenue than was the case in the 2012-13 budget year that ended on March 31.
Interestingly, B.C. and Manitoba both brought in a land transfer tax in the late-’80s, but today there’s a distinct difference between how the two taxes are applied. In 1994, B.C. exempted first-time buyers up to a threshold value of $275,000. Manitoba’s only change since introducing this home buyer tax is to increase the highest tax rate from 1.5 per cent to two per cent in 2004 for any home valued over $200,000.
B.C. recognized 20 years ago that first-time buyers have enough of a challenge to come up with a down payment and other closing costs when purchasing a home. As a result, the B.C. government has increased the exemption amount for first-time buyers on three separate occasions, including on February 19 this year.
Locally, 76 per cent of all MLS® single-family home sales in 2013 went for or above the $200,000 level where the two per cent tax rate applies. For every $50,000 over this amount, the buyer must pay another $1,000 in land transfer taxes, adding up to a very substantial upfront closing cost.
B.C.’s first-time home buyers
First-time home buyers received long awaited and welcome news yesterday when the provincial government released its new budget. Effective for properties registered on or after February 19, under the First-Time Home Buyers Program, you can now purchase a home worth up to $475,000 without incurring PTT (Property Transfer Tax). They have also continued the partial exemption which now applies to homes valued between $475,000 to $500,000.
What could this mean for you? Up to $7,500 that you can put back in your pocket. Or maybe, instead of buying a condo, you can now qualify to purchase a townhouse, or instead of an attached property, you can qualify for a detached home.
The Real Estate Board of Greater Vancouver along with the B.C. Real Estate Association has been actively lobbying to make homeownership more affordable for years. The province introduced the PTT 26 years ago. It was structured to add one per cent on the first $200,000 of the purchase price, and two per cent on the balance. At that time, only five per cent of Metro Vancouver houses sold for $200,000 or more.
In 2005, the government increased the threshold from $275,000 to $325,000. In 2008, as a result of real estate industry lobbying, the government increased the threshold from $325,000 to $425,000. With the new threshold of $475,000, the government estimates that it will cost $8 million in lost tax revenue each year.
When you compare B.C.'s transfer tax to the land transfer fee of Alberta, it’s almost laughable. On a $475,000 property, it’s a whopping $130 bucks. So while we're not quite there yet (and will likely never be), it is certainly another small step in the right direction!