BCREA Wants To End Property Transfer Tax
The article below is almost two weeks old but I put it p now because it has stuck in my mind ever since reading it. It brings up some good points. The property transfer tax really is a big chunk of change to add to an already hugely expensive item. Having to add it to your mortgage, thus having to pay interest on it as well makes it worse. The recent, and as far as I know ongoing, tightening of mortgage regulations is making homes harder to afford ending such a tax would give buyers (and by extension, Sellers) a little bit more room to breathe.
Having said that, the money to run the province has to come from somewhere and not being a political science major or having a background in macro economics it’s hard for me to say what they would replace this tax with. I suppose this is why I have kept thinking about this article.
I am still grumpy about the HST though.
Time to axe transfer tax
By Darrell Bellaart, The Daily NewsAugust 11, 2010
It’s time the provincial government started taking a hard look at eradicating the property transfer tax.
The B.C. Real Estate Association is keeping up its push to axe the PTT and has been busy arranging meetings with senior members of government for this September.
Now that the province has followed Ontario’s lead by harmonizing provincial sales taxes with their federal counterpart, it takes away one of the province’s biggest arguments for keeping the tax in place.
Provincial officials wonder how they would replace the millions of dollars the PTT brings in. In the 2002-03 tax year, it added
$400 million to provincial coffers and that amount grew by about $100 million each year afterward, reaching a peak of more than
$1 billion before the real estate market retreated in 2008.
Anyone who has bought a house in the past decade will be familiar with the shocking experience on closing day of sitting at the lawyer’s office and learning that the price of the transaction is several thousand dollars more than expected.
The reason is that in B.C. the first $200,000 is taxed at 1% but anything above that amount is taxed at 2%. The total is tallied up and inserted as a line item on closing day.
For the average Nanaimo homebuyer closing the deal on a $350,000 property, they can expect an additional $5,000 in taxes, which most people will likely add to their mortgage.
Add that to the legal fees, real-estate commissions, assessment and inspection costs and annual property taxes and insurance costs and it contributes considerably to the total the average person shells out each month to keep a roof over their head.
B.C. is not the only province with property-transfer taxes. Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island also use them, but in a recent analysis done for BCREA by economist Stanley W. Hamilton, he said the way B.C. applies the tax makes it “the highest property-transfer tax in Canada,” outside metropolitan Toronto, where a separate municipal tax jacks it up even higher.
Taxation pays for important services like health care and education and social services for the poor and needy.
But a shelter tax has unexpected social costs. It affects rental rates and that means it affects everyone, especially those people surviving on welfare and pensions who suddenly can no longer afford renting.
Many people now live in alleys, under bridges and in abandoned buildings. Suddenly, the province has a homelessness problem, requiring even more tax money to solve.
Taxes alone didn’t drive shelter costs up, but it did play a role.
Nanaimo realtor Jim Stewart was the chairman of the association’s committee fighting to axe the tax for more than 15 years. He says the government “does a terrible job of dealing with issues like affordable housing.”
He’s right. When the government gets involved, projects become more expensive due partly to standards unknown elsewhere in the marketplace. It drove the unit costs of a housing project on Meredith Road through the roof.
When former premier Bill Vander Zalm introduced the PTT in 1988, he said it would be a rich-man’s tax since it only applied to properties beyond the reach of the average worker. Twenty years later, it affects virtually all homes sold in the province.
The BCREA calls for a gradual phase-out of the tax, starting with eliminating the 1% portion applicable on the first $200,000. A year later, it proposes removing it on homes below $500,000, before abolishing it completely.
It’s time to axe the PTT.