Changes to BC’s Property Transfer Tax Exemption
The provincial government has recently introduced a couple of changes to the Property Transfer Tax (PTT) framework for residential home purchasers. The government has recognized that property values have increased significantly, and this is an effort to improve affordability for those getting into the real estate market for the first time. Set to take effect April 1st, 2024. These are the first changes to the PTT framework since 2017.
PTT Changes for Newly Built Properties
The first change, for buyers of newly built property, raises the PTT exemption from a limit of $750,000 to $1.1 million, phasing out to fully payable at $1.15 million. So if you’re buying brand new, up to $1.1 million, you’ll still be expected to pay 5% GST, totaling $55,000, but you will thankfully save the $20,000 in PTT.
Here in the Fraser Valley, this change will mean most new build condos, and a decent percentage of townhomes are now exempt from the tax, unless they’re quite large, or high end. New builds above $1.1 million will largely be detached homes.
Now you might be saying, but Jordan, the average price of a new build has gone up substantially since April 2017. You might even quote data showing that the average new build condo has increased in price by 52% (FIG 3), townhomes by 62% (FIG 2), or detached homes by 75% (FIG 1) in that time. You might say that surely the government only increasing the PTT exemption limit by 47% doesn’t go far enough to lessen the burden on consumers being saddled with the consequences of policy failures at all levels of government?
And to that I’d say…You’re funny.
Adjusting Property Transfer Tax Exemption on Resale Properties
The second adjusts the PTT exemption on resale property for first time buyers. Currently, the exemption limit is $500,000, phasing out completely at $525,000. This limit is being raised to $835,000…Sort of…
Going forward someone buying their first home will still pay PTT on the value over $500,000, up to $835,000, but the first $500k is exempt, and you pay PTT on the balance between $500k and your purchase price up to $835k.
If your purchase price exceeds $835k, up to $860k there is a sliding scale, and if your purchase price is above $860k you pay the entirety of the PTT, even on $500k and below. Does that seem unnecessarily confusing to you too, or is that just me?
Ultimately the exemption hasn’t changed at all, simply the qualification criteria to access the exemption has changed.
That’s not to say that there aren’t savings for buyers, and I’ll always celebrate paying less tax, but the way this is being framed as a revolutionary change to PTT and a large increase to exemptions is a little misleading.
How will these PTT Changes Look?
So let’s say you’ve saved up and plan to buy a 3 bedroom, 2 bathroom townhome in Surrey as your first home. They’re currently averaging about $770k in price, but let’s use $750k for easy maths.
Under the old scheme you’d pay the entirety of the PTT because it’s over the $525k phase out limit, totaling to $13,000 in tax.
Under the new scheme you’d only pay PTT on the balance over $500k, totaling to $5,000. So an $8,000 savings, a discount of 62%.
If you saved up to buy a slightly nicer townhome in Surrey, I was going to use a 4 bedroom as an example, but there aren’t any available under the threshold limit, and picked it up for exactly $835k you’d pay PTT on the amount over $500k, totaling to $6,700. This would have been $14,700 under the old scheme, so it’s a discount of 54%.
Now you might be saying, but Jordan, the average price of a resale home has gone up substantially since April 2017.
You might even quote data showing that the average condo has increased in price by 85% (FIG 6), townhomes by 74% (FIG 5), or detached homes by 57% (FIG 4) in that time.
You might say that surely the government only increasing the PTT exemption CRITERIA by 67% and providing a discount of 50-60% doesn’t go far enough to lessen the burden on consumers being saddled with the consequences of policy failures at all levels of government?
And to that I’d say…You’re funny
But that’s just my opinion!
If you’re looking to connect and chat about all things Fraser Valley Real Estate, whether that’s buying, selling, or investing, give me a call!
