First Time Home Buyers Save Little
So many of my clients are first time home buyers. I love working with them because I love helping people and they are usually the ones who need it most. So how much is the first time home buyer rebate?
So how it currently works is the BC government offers a full rebate of the property transfer tax to qualifying home buyers up to a price of $475,000.
Here’s the major flaw. There is only a full rebate up to a purchase of $475,000. It goes on a sliding scale for anything over that but only up to $500,000. So basically if you buy something for $475,000 you pay no tax. Buy something for 480 you pay $1500, buy something for 490,000 you pay $4680 in tax. Buy something over $500,000 you get zero rebate and you pay the full property transfer tax which is $8020.
In a market that is so hot, where we’ve seen average prices for the condo market in Downtown Vancouver increase by 16% over 1 year, this benchmark number of $475,000 is ridiculous. The average price of a 1 bedroom condo in Downtown Vancouver over the last 60 days is 479,770 (Dec. 2015) Now I know and I will agree that not everyone deserves or is entitled to live in Downtown Vancouver. But as an example someone who might make an offer on a 1 bedroom condo priced at 475,000 in Vancouver there’s a good chance that it goes into multiple offers and sells for 480 or 485 which drastically reduces the home buyers rebate and thus costs the first time buyer even more.
The point is the only reason we have these multiple offers and surging home prices is because of the government to begin with. Their lack of restrictions on foreign investment and the willingness to even track the data is what is driving home values. Not to mention the property transfer tax is a scam to begin with. It’s a tax that was brought in in the 1980’s that charges 1% on the first 200,000 and 2% on the balance. A tax rate that has not changed once to reflect continued increases in home values. The government collects over 1 billion annually from the tax. So do they really need that extra bit of tax from the first time home buyer who buys something for 500,000?
In a market that is becoming more and more difficult for first time home buyers the fact that the benchmark is set at 475,000 is too low. Here’s the full chart of home buyer rebates.
Something to add to that, the BC Government has recently introduced no property transfer tax on brand new homes up to $750,000. This does not apply for your typical re sale. If you buy something brand new off a developer you will pay zero property transfer tax up to a sales price of $750,000. If the sales price is higher then full tax as usual will need to be paid.
