Blog by Andrew Peck

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Let’s stimulate the market now. Reduce the Property Transfer Tax.

Let’s stimulate the market now. Reduce the Property Transfer Tax.

The real estate market has stalled and home buyers are sitting on the fence wondering what to do.

These home buyers may have a down payment. They may even have a home they would like to buy. But they’re waiting.

It’s largely because bad news from south of the border about the housing and financial markets is making consumer confidence falter.

Here in Vancouver the economy is still growing, although at a slower pace than a year ago. Newcomers are still moving here and there are jobs available.

What will help home buyers now?

The BC government can reduce the Property Transfer Tax (PTT). Even small changes will add up to big results when it comes to raising consumer confidence and stimulating the economy.

The government charges the PTT at a rate of 1% on the first $200,000 and 2% on the remainder every time a home changes hands.

This tax adds $8,712 to the average Metro Vancouver home price of $535,600.

Technically home buyers can’t finance the PTT because it’s a closing cost. So buyers end up taking the PTT out of their down payment which means they have to finance more of their principal.

At 6% amortized over 25 years, the $8,712 tax amounts to an extra $16,722 or $55.74 per month.

At Royal Pacific Realty, we are all committed to getting this tax reduced and eventually eliminated.

As members of the Real Estate Board of Greater Vancouver, we’re asking the BC Government to start by:

  • Raising the price threshold for first time buyers to $600,000 from $425,000. Right now qualifying first-time buyers are exempt from the tax, but only if their home costs $425,000 or less. We want this increased to $600,000.
  • Raising the price threshold of the first 1% to $400,000 from the current $200,000 level for all home buyers.

We estimate these two small measures would increase affordability for 250 more home buyers and result in spin-offs of $10.5 million and 61 jobs per year.

This would stimulate the market.

Every time a home sells it generates

  • $42,000 in economic spin-offs and about ¼ of a job.

If 250 more homes sell, this will generate

  • $10.500 million and 61 jobs.

To read the Real Estate Board’s recent submission on the PTT, click here.

Home sales are good for our economy.

How good? This year, Royal Pacific Realty as members of the Real Estate Board of Greater Vancouver, have asked the government to

  • Raise the price threshold for first time buyers to $600,000 from $425,000. Right now qualifying first-time buyers are exempt from the tax, but only if their home costs $425,000 or less. We want this increased to $600,000.
  • Raise the price threshold of the first 1% to $400,000 from the current $200,000 level for all home buyers.

This would improve affordability and we estimate this would result in 250 more home sales per year.

Over 5 years the 1,250 sales will result in

  • $52.5 million in economic spin offs and
  • 350 more jobs.

This is because, every time a home sells it generates

  • $42,000 in economic spin-offs and about ¼ of a job.

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