One of the interesting items that came out of British Columbia’s 2016 budget, as announced by Finance Minister Michael de Jong this past Tuesday, February 16, 2016 (aside from the confirmation of a likely surplus to the tune of $377 million), was the discussion around changes to the Property Transfer Tax, which BC’s liberals hope to be a measure toward improving housing affordability. While ‘housing affordability’ and ‘British Columbia’ can hardly be uttered in the same sentence without choking on the irony, the proposed changes are starting to reflect the significant increase in property values since the tax was first introduced in 1987 by then premier, Bill Vander Zalm.
Property Transfer Tax (PTT) was introduced 29 years ago as one per cent on the first $200,000 of a home’s purchase price, and two per cent on the remainder, payable by a purchaser at the time of purchase. According to a comment by the Real Estate Board of Greater Vancouver in 2012, at the time PTT was introduced, 95% of the homes in the province were below the $200,000.00 threshold. Now, almost 30 years later, the average price of a single-detached home in Metro Vancouver is $1.83 million, yet, until now, the PTT threshold hasn’t been raised from the $200,000 mark. The Budget also proposes to increase the PTT on property purchases over a certain threshold, clearly hoping to capitalize on the ever-increasing property values in the Lower Mainland.
The changes proposed in the Budget will include the following, effective February 17, 2016:
- A new full exemption for newly built homes up to $750,000, with a partial exemption up to $800,000. To be entitled to the exemption, you will be required to live in the home as a principal residence for up to one year after the purchase date.
- The PTT rate will increase from 2% to 3% on the portion of the fair market value of purchase price over $2 million.
- The Home Owner Grant threshold will be increased from $1.1 million to $1.2 million for the 2016 tax year.
What does this look like? When purchasing or acquiring a property in British Columbia, subject to any exemptions under the Property Transfer Tax Act, you will pay Property Transfer Tax on the fair market value of the property at the rates listed below:
- 1% on the first $200,000
- 2% on the portion of the fair market value greater than $200,000, up to and including $2,000,000; and
- 3% on the portion of the fair market value greater than $200,000
For example, if you are purchasing or otherwise acquiring a property with a fair market value of $2,500,000, you will pay Property Transfer Tax as follows:
- 1% on the first $200,000 = $2,000
- 2% on the portion greater than $200,000 up to and including $2,000,000 – $36,000
- 3% on the portion greater than $2,000,000 – $15,000
- Total: $53,000 Property Transfer Tax
If you have any questions about changes to the Property Transfer Tax arising under the 2016 Budget, or other items relating to the purchase of property, please do not hesitate to contact one of our lawyers.
Real Estate Law Lawyers
Langley Law Office