Oak Bay News
The suggestion of a third tier of the B.C. Property Transfer Tax to target “luxury homes” would impact Oak Bay real estate, says the president of the Victoria Real Estate Board.
The current two-tiered tax is applied when a property changes hands.
Unchanged since implemented 30 years ago, the tax charges one per cent on the first $200,000 of the price and two per cent after that.
So, when a $600,000 home sells, $10,000 flows to the government. Overall, the tax currently adds more than $1 billion a year to provincial coffers.
The idea of a third tier for the sale of “luxury homes” has been floated as a way to reduce pressure on the lower end of the market, although what would classify as luxury has not been defined.
Addressing the recent Union of B.C. Municipalities convention in Vancouver, Finance Minister Mike De Jong suggested proceeds from such a tax could be funneled into incentives to build more rental housing or help first-time home-buyers, helping combat unaffordably high housing costs.
However, what’s defined as “luxury” in one market is average in another, noted VREB’s Guy Crozier.
For example, at a $1 million threshold, some communities would have few properties that would be affected, while in parts of the Lower Mainland and Greater Victoria, including Oak Bay, that could be a standard single-family home.
“I don’t think this would get a lot of support here,” Crozier said.
“We don’t want to see it go up and would like to see it become more of a fair tax.”
While prices in Oak Bay and Greater Victoria as a whole corrected following the 2008-09 economic downturn – which wasn’t experienced in Vancouver the same way – average house prices here are on the upswing again. Sale prices in Oak Bay have increased by about 10 per cent since January, Crozier noted.
“Any type of luxury tax put on a home would hit a large portion of sales in Oak Bay, which would be detrimental to the market.”
De Jong has been cautious about how to go about dispensing relief for high housing prices, noting that aid to entry-level home buyers could simply push prices even higher by increasing demand without greater supply.
After addressing the convention, he told Black Press that rental construction incentives could be one piece of the puzzle.
“Is there a way to also encourage the construction of more and new rental housing – that’s very much a part of this conversation,” he said.
Another option is to increase the threshold before the two per cent tax kicks in, or offer an exemption for first-time home buyers where they don’t pay the tax on the first $475,000, for example.
De Jong asked the gathered mayors and councillors whether relief should be focused on first-time home buyers, and whether it should go toward the purchase of any housing, or be targeted to increase the supply of new housing.
De Jong said most community leaders seem to support the idea of reforming the property transfer tax in a way that helps younger families get into the housing market.
He also reminded municipal politicians that they control zoning and therefore have the power to increase density and the number of homes available, applying downward pressure on prices
– with files from Jeff Nagel, Black Press