Realtors, homebuyers and sellers, and others can stop hoping that B.C.’s property transfer tax (PTT) will be discontinued.
It won’t happen. Why? It’s a major cash cow for the provincial government, needed to balance the budget, and there’s nowhere else to raise that large chunk of cash without raising personal and corporate income taxes. Premier Christy Clark is proud of what she says is the country’s lowest tax rate so this kind of special tax, that only hits buyers of property, is not going anytime soon, even though, as Clark herself says, it’s a drag on the economy.
Here’s how it shakes down, according to a recent article by Black Press regional reporter Jeff Nagel: The PTT consists of one per cent charged on the first $200,000 of a property’s value and 2 per cent after that. That means for a $600,000 house, $10,000 is due every time it changes hands.
This calculation is not just a painful hit to the wallet when purchasing a home – it’s a major source of revenue, generating $1.04 billion in 2014.
Consider that the PTT raises significantly more than forestry – formerly the province’s number one industry – which only brings in about $757 million; or natural gas royalties, which at $542 million, generate about half of what the PTT does.
These revenue numbers show how important real estate is to B.C.’s financial solidity. Without a strong real estate market, helped by record-low interest rates, the provincial coffers would be much poorer.
The province also benefits from rising property values, and while there are exemptions for family transfers and first-time homebuyers, it appears the property transfer tax is a necessary evil that raises millions to cover basic provincial services. A strong real estate industry and increased property values, especially in single-family homes, are therefore critical to government budgeting.
So unless the much-vaunted LNG industry or another economic sector can provide a windfall, the PTT is here to stay.
– Black Press