Written for Vancity Buzz by Anne McMullin, President and CEO of the Urban Development Institute.
Confused by the changes announced in last week’s B.C. budget? If you’re looking to invest or buy your first home, there are essential changes to B.C.’s Property Transfer Tax (PTT) that you should know about. As B.C.’s population and economy grows, housing affordability has been a controversial topic. Prices for single family homes in the Greater Vancouver area have increased between 45% to 70% over the past five years.
According to the recent budget announcement, new homes priced up to $750,000 will be fully exempt from the property transfer tax when bought by a Canadian citizens or permanent residents as principal residence and lived-in for one year. This is a great tax break for citizens to take advantage of, and may inspire the purchases of more moderately priced homes. This exemption can save purchasers up to $13,000! For new housing valued up to $800,000, there are partial exemptions available including the first purchase of a new housing unit or newly subdivided unit. In Metro Vancouver, 83% of new homes are priced under $750,000.
If you are lucky enough to come across your own land purchase opportunity, buying land to build homes that will go on to become your principal residence will result in a refund of PTT, provided you complete construction and move in within a year of purchase. However, processing times will need to be greatly reduced – in some jurisdictions where approvals can take up to two years – delaying projects and increasing the cost of housing.
This New Housing exemption is predominantly comprised of the increase in property transfer tax of 3% on the portion of fair market value over $2 million. The 1% rate on the first $200,000 of property value and 2% rate on the value of a property between $200,000 and $2 million still applies. The increased rate is projected to raise an additional $75 million each year.
In addition to this exemption, the government is looking to provide more affordable housing for low-income earners by spending $355 million over five years to support construction and renovation of over 2000 affordable housing units throughout the province.
Changes to data collection will permit the government to gather new information upon registration of their property including:
This will aid the government in assessing foreign investment and to determine if they have any effect on pricing.
With monumental population growth in B.C. – up 70% since the mid ’80s in comparison to the rest of Canada sitting at 35% growth, and the economy growing 2.6% annually since 2001, (1.9% for the rest of Canada), B.C.’s housing market has been unaffordable for some with increasing pressure for more supply to meet the great demand.
Typically in a balanced market, the ratio of new people per housing start should be two new residents per new unit built. However, last year alone the ratio reached a new high of 2.8 new residents per new unit built. Given this tax relief, along with declining mortgage rates, it will be easier for some first time home buyers to get into this hot Vancouver real estate market and own a home of their own.
Anne McMullin is the President and CEO of the Urban Development Institute (UDI) – the leading voice for the development industry in B.C. After a number of years as a journalist, she left the industry to pursue a career in public affairs and public policy. She has made significant contributions to B.C.’s forest industry, Canada’s Aquaculture sector, and other resource industries, and she has been with UDI since 2012. Connect with Anne on Twitter at @AnneMcMullin.