BC urged to lower home taxes

TAXES I Over 25 years, interest on the GST adds $25,000 to the cost of a $500,000 home: Peter Simpson

Fiona Anderson
Sun

CREDIT: Peter Battistoni, Vancouver Sun Files Peter Simpson, CEO of the Greater Vancouver Home Builders' Association, says that the increasing prices of new and resale homes means some taxes should be reconsidered.

AFFORDABILITY I Sales of homes in B.C. continue to break records and as the records fall, government coffers swell.

The province collected $221 million in property transfer tax between April and June, 80 per cent more than the $122 million it had expected. That tax is charged on the fair market value of both new and existing homes -- one per cent on the first $200,000 and two per cent on the balance -- so when prices go up so does the tax.

New home owners can add another seven per cent for the federal goods and services tax to what they'll be paying.

With the increasing prices of both new and resale houses, these taxes should be reconsidered, Peter Simpson, CEO of the Greater Vancouver Home Builders' Association, said in an interview.

"When [the province] brought in the property transfer tax in 1987 the average price of all homes throughout the Lower Mainland, new and used, was about $111,000," Simpson said. "It's well over $350,000 now."

And when the GST was put into place in 1991, the government promised it would review the program every two years, Simpson said.

"We were concerned way back then that it would create housing affordability problems," Simpson said.

Some new developments, Simpson said, have lineups for $500,000 homes. Those people have to pay $35,000 each in GST alone, on top of the purchase price. Most of the time, that amount is just added to the mortgage. Over 25 years, the interest on that tax alone at 4.75 per cent adds another $25,000, Simpson said.

Both the provincial and federal tax schemes have exemptions or rebates in place aimed at easing some of the tax burden for first- time buyers and lower income earners.

The provincial tax exempts first time buyers if the property is less than $325,000 in the Lower Mainland or Victoria, and under $265,000 elsewhere in the province, provided certain other conditions are met.

A partial GST rebate is available for homes under $450,000. That rebate diminishes the higher the price.

Simpson and his association have been asking both levels of government to reconsider the taxes and the exemption thresholds. Last February, the province raised its thresholds for the first-time homebuyers to its current levels.

"That's only a baby step," Simpson said. "And the federal government hasn't done anything to adjust its thresholds."

"We're not asking for the world here. We're just asking in the interest of fairness to review these things and to bring them into line with current realities," Simpson said.

Federal Department of Finance spokesman David Gamble said the concept of reviewing the tax every two years was discussed but never implemented. However, the government does review the GST on a continuing basis.

"We are always monitoring these things and seeing how they work," Gamble said. "We're always trying to determine if the program continues to meet its target."

That target is to ensure that the GST doesn't pose a barrier to the affordability of housing for low and middle income Canadians, Gamble said.

Housing is more affordable now that it was in the 1990s according to housing analysts, Gamble said. And when house prices took a downward trend in the 1990s, the thresholds for a rebate weren't reduced, he said.

The province's tax policy is also always under review, said Jon Chant, communications manager in the Ministry of Small Business and Revenue. But there are no concrete changes anticipated at this time regarding the property transfer tax and any changes would be included in future budgets, he said.

BY THE NUMBERS

This is the tax payable on homes in the Vancouver area based on mean absorption price (price at time of occupancy rather than at time of purchase) for 2005 year-to-date.

VANCOUVER

Single-family dwelling

price $765,860

GST $53,610.20

PTT $13,317.20

total tax $66,927.40

Condominiums

price $319,201

GST $14,300.20

PTT $4,384.02

total tax $18,684.22

Townhouses

price $479,348

GST $33,554.36

PTT $7,586.96

total tax $41,141.32

VANCOUVER CENSUS METROPOLITAN AREA

Single-family dwelling

price $607,424

GST $42,519.68

PTT $10,148.48

total tax $52,668.16

Condominiums

price $313,431

GST $14,041.71

PTT $4268.62

total tax $18,310.33

Townhouses

price $310,749

GST $13,921.56

PTT $4,214.98

total tax $18,136.54

© The Vancouver Sun 2005