The Real Estate Board of Greater Vancouver (REBGV) has been trying to make an election issue out of what it views as an unfair property transfer tax (PTT), which discourages real-estate transactions at a time when sales are at 12-year lows.
Last month's real-estate sales in Metro Vancouver, for example, were the lowest April totas in the region since 2001 and 20.9% below the 10-year sales average for the month.
Real-estate buyers pay a 1% tax on each dollar up to $200,000 and a 2% tax on each dollar they spend above that amount. The only exemption is for first-time homebuyers who spend less than $425,000.
"The PTT was brought in 26 years ago as a wealth tax," said REBGV president Sandra Wyant. "When the tax started, 5% of properties in Greater Vancouver sold for more than $200,000. Now, 95% of properties sell above that amount. The [1%] threshold has not changed in all that time."
Wyant wants the B.C. government to raise the threshold so that buyers pay 1% on each dollar up to $525,000 and 2% on each dollar thereafter. She also wants Victoria to link the 1% threshold to home prices so that if prices rise a set percentage, the 1% threshold rises the same amount.
The problem is that the tax has become a cash cow for the government and any reductions in the tax would hurt its ability to return to balanced budgets any time soon.
The B.C. government raked in about $600 million from the property transfer tax last year, according to REBGV statistics.
REBGV economist Cameron Muir's calculations show that his organization's recommended raising of the 1% threshold would have cost the government about $158 million in 2010.
Exact calculations are tricky, however, because Muir was forced to estimate how many homes were bought by first-time buyers and what those homes cost.
Thinking that the government would simply forego the revenue that the tax brings in is impractical, said Tsur Somerville, associate professor at the University of British Columbia Centre for Urban Economics.
"The question is 'What tax would you do instead?'" he added.
Given the tax's roots as a tax on wealth, the income tax on high earners could be raised, Somerville said.
Other options could be:
- a provincial property tax that is paid annually, much like municipal property taxes;
- a capital gains tax on the profit generated by selling real estate; or
- a PTT that is charged to the seller instead of the buyer; and
- raising the 1% tax threshold but adding a threshold above which buyers are taxed 2.5% or 3% on each dollar.
Parties reject changes to property transfer tax
None of the major parties running in the May 14 provincial election support changes to the property transfer tax that the Real Estate Board of Greater Vancouver (REBGV) is advocating.
"Our budget and platform does not include any changes to the PTT," said Finance Minister Mike de Jong, who is also a BC Liberal candidate in Abbotsford-West. "We are committed to balancing our budget and the province does not have the financial room to make any changes to the PTT at this time."
NDP finance critic Bruce Ralston, who is a candidate in Surrey-Whalley, similarly rejects the idea that his government would forgo any of the revenue that the tax generates.
"We will not be changing the PTT at this time," he told BIV. "In discussions with the real estate and development industry over the last couple of years, we have indicated we are open to considering proposals to improve the PTT that are revenue neutral."
The Green Party of BC has no policy on raising the 1% threshold of the property transfer tax because the issue has yet to register as a concern among voters, said spokesperson David King.
No one from the BC Conservatives responded by press time to BIV's requests for the party's position on the tax.
