Each year, the BC Legislature's Select Standing Committee on Finance and Government Services travels throughout BC seeking input about spending and taxation priorities for the upcoming provincial budget.
The Committee reviews and summarizes this information and reports its findings to the Finance Minister, who uses it as input in budget deliberations.
Representatives of the Real Estate Board of Greater Vancouver had the opportunity to make recommendations.
BCis on target to balance the 2014/15 budget with a projected surplus of $266 million. This means the time is right to reduce the Property Transfer Tax (PTT).
Reducing the PTT matters to families and anyone working in real estate-related jobs including architecture, construction, home inspection, leasing, brokerage, mortgage lending and legal services.
Real estate plays a vital role in growth, providing jobs and small business opportunities.
Real estate’s contribution to the economy in Greater Vancouver is enormous. In 2013, 28,524 MLS® home sales in the Real Estate Board’s area generated $1.84 billion in economic pin-offs and created 13,977 jobs. Real estate is the backbone of our communities. Province-wide, the housing sector (construction and real estate) accounts for 25.6% of total economic activity (GDP).
Government is responsive
In 2013, in response to our message, “Help Reduce the Property Transfer Tax", the government made it possible for first-time buyers to buy a home worth up to $475,000 and not pay the PTT. Previously the threshold was $425,000.
Given the projected 2014/15 budget surplus, the government can afford to make changes to the PTT. Continuing to rely on the PTT for a large share of revenue – estimated to be $854 million in 2014/15 – unfairly increases the cost of homes and reduces access for middle- and lower-income buyers.
Who will benefit?
Our communities, including first-time buyers and anyone working in real estate-related jobs will benefit.
Think about when we were younger, landing a first job, buying a modest first home, starting a family and then trading up to a larger home has been a right of passage for generations.
Today, this is possible for fewer and fewer younger British Columbians. The rate of home ownership for 25-34 year olds in BC is now 48.2%. In Ontario it’s 53.8%, in Alberta it’s 59.3% and Canada-wide it’s 52.4%.2
In our Real Estate Board area, the benchmark price of a detached home is $633,500.3 The PTT adds $10,670 to this price given that this home does not qualify for the first-time buyers’ exemption. It’s difficult for first-time buyers to afford this home given that the annual income required is $100,216.4 The average household total income in the Vancouver CMA is $83,666.5
As a consequence, six in 10 first-time buyers are delaying their home purchase, which in turn, significantly dampens economic activity in our neighbourhoods.6
Making adjustments to the PTT would ensure home ownership is more affordable, which in turn is a strategy for a secure and prosperous future.
The PTT is charged at a rate of 1% on the first $200,000 and 2% on the remainder of the home price. We urge the government to:
1. Increase the 1% threshold to $525,000 from $200,000 to modernize the PTT to better reflect the current price of homes. The 2% rate would be applied to the remainder of the home price.
2. Index the 1% threshold to ensure it more accurately reflects housing market changes over time, using Statistics Canada’s New Housing Price Index or the MLS® Home Price Index, and make annual adjustments.
1 Natural Resources 7.7% is comprised of Agriculture, Forestry, Fishing and Hunting at 1.85% and Mining, Quarrying and Oil and Gas Extraction at 5.81%.
2 Statistics Canada 2011 National Household Survey. Home ownership, by province, as a percentage of all households where the primary maintainer is aged 25 to 34 years old.
3 Real Estate Board of Greater Vancouver composite residential benchmark price, as at September 2014.
4 See Footnote D on reverse.
5 Statistics Canada 2011 National Household Survey. Vancouver Census Metropolitan Area (CMA) Average Household Total Income.
6 BMO Home Buying Report, First-time Buyers’ Budgets Increase to $316,100 (Canada-wide) While Rising Prices Cause Delays, BMO,
March 18, 2014.