The dreaded Property Transfer Tax turns 25
The much hated Property Transfer Tax celebrates its 25th birthday this year.
Published Monday, November 26, 2012 6:00AM PST
Last Updated Monday, November 26, 2012 2:57PM PST
The much hated Property Transfer Tax celebrates its 25th birthday this year, and like the never-ending airport improvement fees, consumers say the tax has outlived its original intent.
The PTT arrived in 1987, the same year Jon Bon Jovi topped the charts with "Livin on a Prayer" and the Loonie made its debut. Back then the average home price in greater Vancouver was just over $147,000.
It was in those very different times that former premier Bill Vander Zalm introduced the Property Transfer Tax – one per cent on the first $200,000 of a home's sale price and two per cent on the remainder.
"The idea of it was that we were going to tax speculation and wealth -- so you had 95 per cent of the homes at that time below that $200,000 threshold," said Eugen Klein of the Real Estate Board of Greater Vancouver (REBGV).
But a quarter century makes a big difference. The average price of a detached home in greater Vancouver now is just over $1.03 million, but the tax threshold remains locked at $200,000.
Klein said if the PTT was applied to only the top five per cent of all home sales today, as it was intended, the $200,000 threshold would need to be raised to more than $1.4 million in greater Vancouver.
Only 2.5 per cent of homes sold on the Multiple Listing Service in greater Vancouver in 2011, or 839, sold for less than $200,000.
First time home buyer Nathan Sellyn, who recently purchased a one-bedroom Gastown loft for around $580,000, said the added tax burden was a shock to the senses, and the wallet.
"It was just a shade under $10,000, so yeah it was a big kick in the pants -- sort of 20 per cent of our total renovation budget out the door," he told CTV's Steele on Your Side.
Sellyn's realtor Ian Tang specializes in Vancouver heritage loft conversions and deals with many first time buyers. Tang says the tax hits all of his clients hard.
"With property values going up, it's increased so much now that it seems like a cash grab. I don't think [the government] is doing that intentionally -- but I also think they're not just going to take it away," Tang said.
Since it was brought in, B.C. home buyers have paid nearly $12 billion worth of property transfer taxes -- money that goes straight into provincial coffers.
"[It's] $900-million bucks a year. They have no idea how to ratchet down their addiction to this money," said Jordan Bateman of the Canadian Taxpayers Federation.
Bateman said the transfer tax is a cash cow that hurts B.C. families, but the Liberals can't easily cut it because it's a substantial earner.
"As a finance minister you can't just say ‘well let's get rid of it' because then you'd have to cut a billion dollars in spending," said Finance Minister Kevin Falcon.
Falcon acknowledges the tax is an irritant to many B.C. residents, but said the money goes into provincial coffers and is used for essential services, like health care and education.
He does, however, hint there may be some relief regarding the transfer tax in next year's budget.
"You know the thresholds have never been adjusted, so I do think that's something in the future we need to take a look at to ensure that at least it applies to thresholds that are more realistic -- given the realistic prices in British Columbia," Falcon told CTV News.
Have your say: What do you think of the Property Transfer Tax?