Blog by Patricia Houlihan - Personal Real Estate Corporation | February 17th, 2016
Well the budget changes have been announced and there are three key real estate related changes:
There will be no Property Transfer Tax ("PPT) on NEW homes up to $750,000. This will help some first time buyers who are trying to get into the market but there is really nothing in the budget to help families living in and around Vancouver: the people who currently have a harder time purchasing a home than families anywhere else in North America.
We are now seeing prices of $2 million and higher for somewhat average family homes in many areas ($2.48 will get you a tear down in Point Grey). These prices have translated into the Provincial government making an absolutely huge windfall on the PPT for many years. I would prefer the PPT be very minimal or non existent but I recognize that will never happen. Although the average price in Vancouver hit over $2.5 million as of January 2016, the Province has decided it's appropriate to increase the PPT by 1% on those homes with a market value over $2 million, for the portion over $2 million. Most Vancouverites cannot afford to buy a decent sized home (by which I mean over 2000 square feet on a small piece of land-usually 33 x 122) and this increase makes that purchase even harder. On a $2.5 million home (bearing in mind the tear down that just sold for $2.48 and became famous in the media last month-$2.5 does not get you much) a young family which has begged, borrowed and perhaps stolen (from their future inheritance if they are lucky enough to have one) the amount payable will be $53,000!!!! That's a lot of money which could have been used to fix the plumbing, heating and other problems that will likely be present in a $2.5 million dollar home in Vancouver. Fortunately there are areas not too far from Vancouver where prices are slightly lower but the tax still eats up a very significant chunk of hard saved money.
Also of benefit to some, the Home Owner Grant threshold has increased from $1.1 to $1.2 million. However, for those families living in and around Vancouver, there will be no Home Owner Grant because there are very few, if any, family homes available in that price range.
One additional positive is that the Province will start collecting some data on who is buying homes here.
The budget commentary suggests that the above measures will improve housing affordability-but I would think that will not be the case in and around Vancouver-where affordability is the biggest issue. There are are other ways to raise tax on real estate transactions.... I suggest the Province consider what some other jurisdictions have done and impose a super tax on those who buy real estate here, live here, use the roads, schools, hospitals, etc. but somehow have no income despite having purchased multi million dollar homes. Other ideas? Something does need to be done...while I do think almost everyone can get into the market with the right advice and a good attitude, it shouldn't be this hard.
If you are trying to get into the market or move up in the market and need to strategize, please contact me. It can be done!