With an ancient property tax formula, some homebuyers are seeing red when it comes time to cough up their property tax payments. Many homebuyers are pointing out to politicians that the tax only continues to aggravate the affordability crisis in Vancouver’s real estate market. Starting in 1987, the British Columbia government put into effect the Property Transfer Tax. While the formula has remained the same for the past thirty years, the average home price has most definitely not , leaving the funds collected by the government totaling up to $937 million alone for fiscal year 2013-2014 – an increase by almost one-hundred percent in just over ten years.
The exact formula for the Property Transfer Tax is as follows:
Initial $200,000 = 1 percent of the purchase price
Over $200,000 = 2 percent tax rate on the amount greater than $200,000
$185,000 house owes $1,850 for Property Transfer Tax
$650,000 house owes $11,000 for Property Transfer Tax
When the formula was first devised in 1987, only five percent of properties that transferred hands were priced greater than $200,000. With Vancouver’s burgeoning real estate market, the metro area is now seeing more than ninety-five percent of homes priced greater than $200,000 at the time of transfer. The current Property Transfer Tax reflects the home prices of the 1980’s, not today’s home prices. Furthermore, many claim the tax clearly targets wealthier buyers and as evidenced by the overflowing monies of the government, nearly captures the entire real estate market. The only break on this tax is for first time homebuyers if their purchase price is $475,000 or less – allowing them a $7,500 tax break.
Many locals point fingers overseas to the wealthier buyers, for whom the property transfer tax is merely a drop in the bucket. While the offshore buyers have added to the revenues of the local government due to the high property taxes, the foreign investors have also left little room for local buyers, burdening first time homebuyers and young families with excessive expenses. Some locals assert that offshore buyers should pay a higher property transfer tax, while locals should not. The legal and moral implications with this assessment leave many politicians weary of making any changes at all.
Many question whether more homeowners would sell and buy properties if the government did in fact lower the property transfer tax. If so, this could generate revenue outside of the government to businesses on the periphery of the real estate market, such as brokers, builders, lawyers, appraisers, and other trades.
With a large global demand for Vancouver properties and a small local supply, many homeowners are waiting out their properties for when the time is just right to sell. Coupled with the government’s desire to not change the formula for property transfer tax anytime soon, local homebuyers and purchasers of properties in British Columbia need to plan for peak pricing. Whether you are buying or selling in Vancouver – you will need to start planning your move. Contact our professional moving company in Vancouver for a free – no obligation moving quote.