Association calling for changes to land transfer tax

WinnipegREALTORS® is asking the province to exempt first-time home buyers from its Manitoba land transfer tax (LTT) as well as overhaul the percentages levied on other home purchases in its March 25 budget.

“A first-time home buyer exemption will encourage young Manitobans to stay in our province,” said Don Cook, the chair of the association’s civic and legislative affairs committee.

“It is hard enough for them to come up with the necessary money to make a decent down payment and meet closing costs without having another fee attached,” he added.

“It is important to understand the Manitoba LTT is an additional closing cost a purchaser must come up with before taking possession of a property. You cannot add it to your mortgage as you do with the CMHC insurance premium on a five-per-cent down. First-time buyers are least able to afford this extra cost.”

B.C. and Ontario already provide some relief for first-time buyers from their land transfer tax, while Saskatchewan and Alberta do not have a similar tax.

WinnipegREALTORS®, with support from the Manitoba Real Estate Association, is lobbying the province to reduce its LTT by changing the way the tax is levied. The tax was originally introduced in 1987 to help fund the provincial land registry system, but has since turned into a “windfall”for the provincial treasury. 

The association provided the example of the LTT increasing from $3,250 on a home valued at $280,000 in 1987 to $16,690 when the home sold in 2008 for $952,000. 

A more modestly-priced home sold for $200,000 in 1987 and inccurred a $1,650 LTT which increased to $8,768 when the home sold for $555,900 last year.

A November 2007 study of the LTT by Will Dunning, the chief economist for the Canadian Association of Accredited Mortgage Professionals, concluded the LTT rapidly increased over a decade because the taxes are calculated on sliding scales and the brackets for the scales have not been adjusted.

Based on Manitoba’s average home selling price of $168,421 in 2007 compared to $85,404 in 1997, the LTT payable to the province jumped 358 per cent as opposed to the 97 per cent home price increase.

Dunning said the LLT increased substantially above any reasonable operating costs incurred by the land registry over the same period.

“The taxes levied on land transfers 

are far in excess of any social or governmental costs that result from the activity of home buying and therefore these 

discriminatory taxes are not justifiable,” he added.

The current LTT rate is 0.5 per cent for the portion of the selling price from $30,000 to $100,000, one per cent between $90,000 and $150,000, 1.5 per cent between $150,000 and $200,000 with any portion over $200,000 at two per cent. 

WinnipegREALTORS® is proposing that the charges be changed to 0.5 per cent on the first $0 to $100,000, one per cent from $100,000 to $200,000 

and 1.5 per cent for the portion 

between$200,000 to $500,000. 

Anything over $500,000 would not be taxed, as any home sale exceeding this amount still nets the province $6,000 in revenue.

Cook said an exemption for first-time home buyers will have an immediate impact. Without being faced with the prospect of this tax, buyers can save for their down payment and closing costs associated with a home purchase.

“Our bottom line is the provincial land transfer tax makes home buying more costly,” said Cook. “In times when the economy is going through a slowdown, the government should do anything in its power to support a key sector of the economy that generates millions in economic spin-offs and jobs.”

Cook pointed out that home sales through MLS® generated $300 million in economic spin-offs in 2008.

Cook said more first-time buyers entering the housing market will also free up much-needed rental accommodations which are now in short supply as Winnipeg now has one of lowest vacancy rates in the nation at under one per cent. 

More rental properties will house the immigrants the province wants to attract to Manitoba, he added.

While Manitoba currently provides a LTT exemption on homes sold for under $30,000, the B.C. threshold is $425,000 for first-time home buyers. Ontario has a threshold of $222,000, which means a first-time home buyer only pays $975 in LTT on a $300,000 home.

Cook said modifying the LTT in the March 25 budget would be a signal to Manitobans that the government is sensitive to the challenges now facing the province.