Government urged to help first-time buyers enter property market by reducing or scrapping tax
Michael Kane
Sun
Finance Minister Carole Taylor is being urged to make homes more affordable for first-time buyers in her budget next February.
Pre-budget consultations show broad support for raising property value thresholds to allow more buyers to escape property transfer tax, according to the select standing committee on finance and government services.
The tax currently adds $6,000 to the cost of a $400,000 home. Projections indicate it will take $650 million out of the pockets of property purchasers this budget year alone, according to the B.C. Real Estate Association.
“The [tax] strikes at the very heart of housing affordability across our province and I’m hopeful that the February budget will include measures to reduce its burden on first-time homebuyers, middle-income purchasers and low-income earners,” association president Dave Barclay said in a news release.
The property transfer tax is charged at one per cent of the first $200,000 of a property’s value and two per cent on the remainder. First-time buyers are exempt if they spend less than $325,000 in Greater Vancouver, the Fraser Valley and Victoria, or $265,000 elsewhere.
The all-party select committee of 10 MLAs recommends that the government review the exemption levels for first-time home buyers with a view to making homes more affordable, but doesn’t spell out how that should be done.
It notes that the issue has been exacerbated by dramatic increases in housing prices over the past few years and that ownership for many housing types remains “firmly out of reach of median income earners.”
A study commissioned by the B.C. Real Estate Association shows that eliminating the tax would allow 7,310 families to enter the housing market, create 5,460 person years of employment, generate $422 million in extra spending and $81 million in tax revenue.
The study, by Malatest & Associates Ltd., also says that if the government simply removed the one per cent payable on the first $200,000 of the purchase price of a home, but kept the two per cent payable on the balance, it would enable 3,850 families to enter the housing market, create 2,880 person years of employment, generate $223 million in extra spending and $43 million in tax revenue.
Barclay described the select committee’s acknowledgement of concern about the impact of the tax on first-time buyers as “very encouraging.”
His association is recommending the provincial government table a plan to eliminate the tax, or “at the very least, significantly reduce it,” while the Real Estate Board of Greater Vancouver is calling for the exemption ceiling for first-time buyers to be raised to $375,000 and adjusted every year.
© The Vancouver Sun 2005
