A roaring real estate market is expected to generate $200 million more than the province expected in property transfer tax this year, further pushing up housing costs in urban areas that are already beyond the reach of many people.
Finance Minister Mike de Jong says he is working on new ways to reduce the burden of a tax that hits properties every time they are sold. That could include a higher rate for high-priced properties, as suggested by Vancouver Mayor Gregor Robertson. He proposed it as a way of discourage property flipping in a city that sees bidding wars for all but the most costly homes.
Since the tax was brought in by former premier Bill Vander Zalm in 1987, its take has grown to more than $1 billion a year. Since its inception, it has charged one per cent on the first $200,000 of the home purchase price and two per cent on the rest, taking about $10,000 on the sale of a $600,000 home.
De Jong said this week he is considering adding a third step for high-end properties, with revenues used to reduce the burden on middle-priced homes. Another option considered for next February’s budget is to raise the exemption for first-time buyers, currently spared the tax up to $475,000.
“How many first-time buyers are purchasing homes in excess of that is a question that deserves to be asked before we tout a further reduction of that threshold,” de Jong said.
Statistics Canada reports that Vancouver’s housing price index was up 1.6 per cent in July, compared to the same month last year. Victoria’s index fell by 1.5 per cent.
Premier Christy Clark said in February she wants to eliminate the property transfer tax in the long term, once the province’s debt is reduced. De Jong’s financial update this week showed the province paying down operating debt accumulated since the recession of 2008-09.
NDP finance critic Carole James said the province is expecting a $277 million surplus this year, most of it accounted for by the windfall from property transfer tax.
“For an economy to rely on a hot housing market in the Lower Mainland and [Vancouver] Island is a problem,” James said. “We need a diverse economy.”