How Do You Reduce Property Transfer Tax in British Columbia
British Columbia (BC), located on the westernmost coast of Canada, offers a captivating blend of stunning natural landscapes, vibrant cities, and a thriving economy. The province promises a balance between affordability and high quality of life, making it an attractive destination for an exceptional lifestyle in Canada without breaking the bank.
According to the 2023 Mercer Cost of Living survey, BC’s largest city (by population), Vancouver, is a promising prospect for those concerned about the cost of living. Despite being considered one of the most expensive cities in Canada, Vancouver still ranks at #116 globally, which is relatively favourable.
Surrey, Victoria – the province’s capital city, Burnaby and Kelowna are other major cities in BC attracting many immigrants every year to work, study or live. Undoubtedly, Vancouver real estate, if not BC’s housing market as a whole, is thriving.
In fact, despite an economic slowdown, Canada has maintained a relatively stable inflation rate in 2023.
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Home Prices in British Columbia
The section below is an overview of the current state of home prices in BC, highlighting the ongoing recovery and regional variations within the market.
Home prices in British Columbia have been rising, with the average home price reaching $1,019,145 in May 2023, a 2% increase from the previous month. Compared to last year, home prices are now 3% higher.
This upward trend is seen in housing markets across Canada, including Toronto and Greater Vancouver. BC recorded 9,191 home sales in May 2023, a 10% increase from the previous year and a 24% increase from the last month.
The Greater Vancouver housing market saw its average sold price rise by 2% to $1,311,090. While some regions experienced price declines, others, like the Fraser Valley and Powell River, saw increases. Detached homes in Greater Vancouver had an average sale price of $2,163,080, townhouses and attached homes averaged $1,238,219, and condo apartments averaged $823,044.
Property Transfer Tax (PTT) in BC
The BC Property Transfer Tax (PTT) is imposed when purchasing or acquiring an interest in a property registered at the Land Title Office unless an exemption applies. It is important to note that the PTT differs from the annual property taxes paid yearly to municipal or rural tax offices.
The PTT rates depend on the fair market value of the property and the property type. There are three rates to consider:
- General Property Transfer Tax
1% on the fair market value up to and including $200,000.
2% on the fair market value greater than $200,000 and up to and including $2,000,000.
3% on the fair market value greater than $2,000,000.
- A Further 2% on Residential Property over $3,000,000:
If the residential property has a value of over $3,000,000, an additional 2% tax applies to the value exceeding $3,000,000.
For mixed-class properties (residential and commercial), the 2% tax applies only to the residential portion. An exemption from this 2% tax is available for qualifying purpose-built rental buildings on the part of the residential property value that exceeds $3,000,000.
- Additional Property Transfer Tax
Foreign nationals, foreign corporations, and taxable trustees are subject to the additional property transfer tax. This tax applies to the fair market value of the property’s residential portion if it is within a specified area of British Columbia.
You or your legal professional must file the property transfer tax return and pay the tax. Legal professionals typically facilitate property transfers, and various transaction types, such as foreclosure, lease, fee simple, court order, and more, are subject to the PTT.
The First-Time Home Buyers’ Program
British Columbia introduced the First Time Home Buyers’ Program to support and encourage first-time homebuyers in their journey towards homeownership. Recognizing the financial challenges the first-time home buyer faces, the program aims to alleviate the burden by reducing or eliminating the Property Transfer Tax (PTT). The program aims to make homeownership more attainable and affordable by providing exemptions and financial relief.
To qualify for a total exemption, buyers must be permanent residents or Canadian citizens, have resided in BC for at least one year or filed 2 IT returns in the last 6 years, have no previous property ownership, and have not received any previous first-time home buyers’ exemption or refund. The residence must have a fair market value of $500,000 or less, be 0.5 hectares or smaller, and be the buyer’s principal residence.
The buyer’s legal professional submits the property transfer tax return to apply for the exemption. If approved, the buyer must meet specific requirements during the first year of ownership. For existing homes, the buyer must move in within 92 days of registration and continuously occupy the property as the principal residence until the first anniversary of the registration date.
For new homes on vacant lots, the fair market value of the property and construction cost must be under $525,000, and the buyer must have built and moved into the home within the first anniversary of registration. A partial exemption may apply in certain circumstances if the buyer moves out before the end of the first year.
Other Initiatives for Home Buyers
The BC government has implemented various initiatives to support homebuyers to make homeownership more accessible. These programs include the First Time Home Buyers Incentive, which provides shared home equity of up to $25,000 for eligible individuals purchasing homes valued at up to $722,000. Another valuable option is the Home Buyers Plan, allowing individuals to utilize up to $35,000 from their Registered Retirement Savings Plan as a tax-free down payment.
Additionally, as mentioned above, BC offers Property Transfer Tax (PTT) rebates, exempting properties under $525,000 from the tax and making homes under $500,000 PTT-free.
However, with the continued increase in real estate prices, industry experts, such as the Real Estate Board of Greater Vancouver (REBGV), recommend additional measures to address affordability concerns. The REBGV has suggested removing the PTT for homes under $755,000, including new construction and resale properties.
In Conclusion
In response to the rising prices, especially in areas like Metro Vancouver, the proposal to remove the Property Transfer Tax for homes under $755,000 seeks to create a more accessible path to homeownership. Ongoing discussions and advocacy efforts are currently taking place to encourage policymakers to consider and implement policies promoting affordability in the BC housing market.
Prospective home buyers need to navigate Real Estate Canada with guidance from professionals in the real estate industry. Consulting with experienced professionals can help the first-time home buyer make informed decisions and navigate the complexities of buying a home in BC’s dynamic real estate landscape.
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