The government of British Columbia experienced an incredibly good year financially, ending up with a 3.5 Billion dollar surplus at the end of March, 2006. Our Finance Minister pointed out several reasons for this stellar financial performance, but I don’t recall her referring to the cash cow that is the Property Transfer Tax.
Under British Columbia legislation, the general rule is that Property Transfer Tax is payable on virtually every transfer of every interest in British Columbia real estate. Unless your circumstances fall within one of the defined exceptions to the general rule, you will pay one percent on the first $200,000 of the fair market value of your property, and two percent on every penny thereafter.
At the time Property Transfer Tax was introduced in 1987, the average single family home price in Victoria was about $110,000. Today, that average is well over $500,000. Yes, tax revenues have increased! In 2005 revenue going into BC coffers from Property Transfer Tax Property was in the order of $800 million – it’s not too hard to understand why our Provincial government doesn’t seem overly interested in changing the status quo!
What does this mean on an a typical purchase in Victoria? Given the average price of a single family home in Victoria, a typical buyer here may anticipate having a Property Transfer Tax bill of at least $8,000! And it must be paid at the Land Titles Office when (before) the transfer will be registered.
What about those exceptions I mentioned? Well, if you are a qualified first time home buyer, you’re in luck. But the word ‘qualified’ involves many aspects, including citizenship, residency before and after the purchase, value, location and size of the property, the amount and term of your mortgage financing, whether or not the property is entirely residential, and whether or not you have owned an interest in property, anywhere, before.
The devil is in the details, so always check the legislative fine print before writing our offer to purchase. You can find a copy of the current government Guide here.
What you’re going to discover is that the price point at which a first time home buyer becomes ineligible for an exemption eliminates virtually every single family home in Victoria: a fair market value of up to $325,000 is OK, but at $350,000 or higher, there is no first time eligibility. Between those two figures, the size of the exception is prorated.
There is a second ‘Special’ set of potential exceptions. They relate mainly, but not exclusively, to transfers of property between related individuals. The rules are complicated, so read them carefully and seek advice if needed.
And always remember, conformity with the rules is also actively monitored by Provincial authorities.
Bye for now,
...Victoria's blogging real estate professional.
[...] been some time since I talked about Property Transfer Taxes in British Columbia (my earlier article is here). Since then there have been a few changes, the most recent of which went into effect on February [...]