News Release

Real Estate Board’s message this election: Help reduce the PTT


VANCOUVER, BC – April 23, 2013 –  BC voters head to the polls on May 14 and the Property Transfer Tax (PTT) is a top election issue for the Real Estate Board of Greater Vancouver (REBGV).  

 

The REBGV has launched a campaign to raise voter awareness of the need for the next government to reduce the PTT. 

 

“Our goal is to send a strong message to this year’s candidates that it’s long overdue for government to reduce the burden of the PTT on home buyers,” Sandra Wyant, REBGV president said.

 

To support this campaign, people can “like” our Facebook page at facebook.com/helpreducetheptt.

 

The province introduced the PTT 26 years ago. It was structured to add 1 per cent on the first $200,000 of the purchase price, and 2 per cent on the balance. The government of the day touted the PTT as a wealth tax, as just 5 per cent of homes in Greater Vancouver sold for $200,000 or more. 

 

Since 1987, home prices have increased substantially. Yet, after all these years, the tax’s structure hasn’t changed. Today, 96 per cent of homes in Greater Vancouver sell for more than $200,000.

 

“It’s time to relieve some of the unfair tax burden the PTT places on home buyers and we’d like to know where the candidates and parties stand on this issue,” Wyant said. 

 

The PTT adds $10,000 to a $600,000 home. It annually generates $780 million for the provincial government. This money goes into general revenue to fund public services. 

 

The PTT is paid each time a property changes hands in the development process. When a developer buys raw land, the developer pays the PTT. When a builder buys lots from the developer, the builder pays the PTT. When a home buyer buys a home from the builder, the home buyer pays the PTT. Every time that same home is sold, the next buyer pays the PTT.

The REBGV is asking candidates if they would support increasing the one per cent threshold to $525,000 from $200,000. This would mean that on a $600,000 home, the PTT would be $6,750, instead of $10,000, saving home buyers $3,250. 

 

“We know it would be difficult for any future government to replace the revenue generated from the PTT, but this is a case where the notion of tax fairness needs to apply,” Wyant said. “The next government of BC should adjust the PTT to better reflect the tax’s original purpose,” Wyant said.

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When you’re looking for a new home, you want to find one in a great neighbourhood – or, at least, in a neighbourhood that is on the upswing. How can you tell if a particular area is improving? Here are some common indicators:

 

  • Pride of ownership. Take a walk around the neighbourhood. Do you get a sense that people take good care of their homes? Are the lawns mowed? Is the landscaping trimmed? Are flowers planted? Homeowners are more likely to look after their properties when they like where they are living.
  • Home improvements. Are people investing in their homes? Are they getting their driveways re-done? Their windows replaced? Are there signs of home improvement projects? If so, this is a clear indication that homeowners like the area enough to invest in their properties.
  • Real estate sales activity. Do homes tend to sell quickly in the area? Do they sell for a good price? If so, the neighbourhood is probably in demand. If people want to live there, it's a desirable area.
  • Business investment. Are businesses investing in the surrounding area? Is there an increase in the number of upscale shops, health clubs, restaurants, and other commercial enterprises that often locate near desirable neighbourhoods?
  • Community involvement. Are there signs that the community plays an active role in the look and lifestyle of the neighbourhood? Are there neighbourhood picnics, yard sales and other get-togethers? Check Facebook.com to see if the neighbourhood has a community page.
  • City plans. Find out what plans the city has for the area. Will there be road improvements done in the near future? Are there any major construction projects on the schedule, such as a new school or community centre. Although such projects can be disruptive in the short term, they may improve the neighbourhood – and, as a result, boost the value of any home you buy – in the long-term.

Of course, the best way to find out the desirability of a neighbourhood is to talk to a good REALTOR® who knows the area. Call today.

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With the reintroduction of the GST/PST tax regime on April 1st, we have received some questions about how this will affect the real estate market. The short answer is: There will be a minimal effect; some people will win, while others will lose. However, we must break down its effects into 3 separate categories: New Construction, Resale, and Fees.

 

New Construction


This category is the one that is likely to be most influenced by the change back from HST to GST. All new residential construction will be taxable at the 5% rate rather than the previous 12%. However, the government will also be eliminating the New Housing Rebate, and adding a 2% transitional tax (for a total 7% rate, down from 12%). With the lower tax burden, there should be a net savings for buyers of newly constructed real estate in B.C.

 

But that's not the end of the story. The change back from the HST to the GST & PST will result in higher construction costs as government rebates for input costs are eliminated. That means that while the tax burden may go down on these homes, the cost base will go up.

 

The net result is that for homes valued at more than $525,000, the overall cost will likely go down, while homes that are valued at less than $525,000, the overall cost will likely increase.

 

For more details, see the government's GST/HST info sheet: http://www.cra-arc.gc.ca/E/pub/gi/gi-132/gi-132-e.pdf.


Resale


The change back to GST should have little to no effect on the resale market as 'used' homes are not subject to HST and will not be subject to GST or PST. There is no change to the Province of B.C.'s Property Transfer Tax, which will remain the same: 1% on the first $200,000; 2% on the balance.

 

Fees


The change back to GST will apply to the fees associated with a transaction and will lead to a slight decrease in these fees. That said, many of the fees currently associated with transacting a home already charged both GST & PST so there will be no change; however, the taxes on a realtor's fees will decrease by 7%. For a $1,000,000 home, real estate commissions typically average around 2.95% of the purchase price. A tax decrease of 7% on this amount means that the typical realtor commission should decrease by roughly 0.2065% of a home's purchase price.

 

Taking all of this into account, it is clear that the change back to the GST will have a positive effect on the market, but only slightly so. That said, depending on your asset class, you may end up behind.

 

To learn more, please feel free to contact me at the address above.

 

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The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.