Short Version
- There are no changes to the first-time home buyer exemption limits (with the exception of point #2 which includes first time buyers).
- All buyers (first-time buyers and repeat buyers) are now exempt from PTT on purchases of NEW homes up to $750,000 in value (think properties on which GST is being charged).
Note: the buyer must be a Canadian citizen or a permanent resident.
Note: there is a partial exemption for homes between $750,000.00 and $800,000.00.
- PTT charged on amounts over $2,000,000.00 has increased to 3%. The 3% tax is only paid on the amount over $2,000,000.00, not the full price.
Long Version
The impact of these changes will not change the Vancouver real estate market in any way at all. The real estate market is driven primarily by one thing: it is not low rates, not foreign buyers, not assignment clause flips, not taxation changes, not down payment changes. It is emotion. Emotion fuels decision making.
People buy homes because they are in love, getting married, having babies, they got a raise, their business is doing well, it was a sunny day and an open house caught their eye. People sell homes because they believe they can time the market (wrong), prices can’t go higher (wrong), they got a job transfer, a divorce, health issues… the lists of good and bad reasons go on, with one underlying dynamic – emotion. ‘We felt it was time to buy, we felt it was time to sell’. Rarely do you hear ‘we calculated’. Feelings and emotions.
Tax Hit (not a big one though)
A client purchasing a $4,000,000.00 home is not slowed by a $20,000.00 increase in purchase taxation. They will still pay the four million; it is a non-issue – a mosquito bite, not the sting of a hornet.
So, no brakes being put on $2M plus sales, just an increase in revenue to help offset the decrease on the break the provincial government is giving to people who are purchasing brand-new properties up to $750,000.00
Tax Break
First-time buyers see only an advantage if they are purchasing a brand new property, now their exemption rises from $475K to $750K (again on new builds only).
Repeat buyers were just given some love. Repeat buyers now get an exemption on new builds up to $750,000 as well. This is huge news and will likely stimulate the move-up buyers to look around, as a $13,000 cash expense has just been removed from the process of moving from one property to a larger, nicer, brand-new place. No doubt this will have a few people jumping off the fence and taking action. Builders, Realtors and clients alike will all rejoice at this news!
Tax Neutrality
The elimination of the Property Transfer Tax on new properties under $750,000 also has one other key impact. It helps offset the recent down-payment increases implemented by the federal government for any buyers of brand-new properties who were looking to put 5% down. Effectively their cost on properties over $500,000.00 up to $750,000.00 is now the same. This news neutralizes the down-payment increase.
The cash expense of a 5% down payment on a $745,000 property just rose by $12,250.00 (to a total of 6.6% or $49,500), but with this announcement the provincial government no longer has their own cash expense of $12,900.00 in the mix (Property Transfer Tax was calculated at 1% of the first $200,000 and 2% on the balance at this price point).
So the down payment went up in this example by $12,250.00 but the PTT cost decreased by $12,900.00. A $745,000 (new build only) property is actually easier to purchase with the minimum down payment for first-time and repeat buyers alike.
No doubt sales centres and developers rejoiced at this new as well.
Always remember to take your Realtor with you to a sales centre, they are your professional representation in the process.
Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts