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The property transfer tax is based on the fair market value of the property (land and improvements) on the day it was registered with the Land Title Office, unless you qualify for an exemption or purchase a pre-sold strata unit.
Fair market value (FMV) is the price that would be paid by a willing purchaser to a willing seller for a property (land and improvements) in the open market on the date of registration.
In the wake of a discouraging real estate market, the BC Provincial government is making four major changes to the property transfer tax framework, which will directly affect home buyers in a positive light:
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To Increase the Fair Market Value Threshold for the First Time Home Buyer (FTHB) Exemption:
At present, the First Time Home Buyer full exemption applies to properties with a fair market value of less than $500,000 with a partial exemption for properties with a fair market value of $500,000 to $525,000.
As of April 1, 2024, the First Time Home Buyer exemption will apply to properties in the following ways:
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For properties with a FMV of less than $835,000, PTT is not payable on the first $500,000, but payable on the difference between the FMV and $500,000. For example, if the FMV of the property is $700,000, PTT paid would be 2% of $200,000 ($700,000 less $500,000). Not paying PTT on the first $500,000 saves the purchaser a total of $8,000.
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If the property has a FMV between $835,000 and $860,000, then a partial exemption applies. The details of which are not yet confirmed by the BC government.
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If the FMV of the property is over $860,000, then there is no First Time Home Buyer property transfer tax exemption.
2. To Increase the FMV Threshold for the Newly Built Home Exemption
Effective April 1, 2024, the FMV threshold to claim the Newly Built Home Exemption will be increased from $750,000 to $1,100,000. A partial exemption is also available for properties with a FMV just above the threshold, with the phase out range being $50,000 above the threshold. Properties with a FMV of greater than $1,150,000 will not be able to claim the Newly Built Home Exemption.
3. Purpose-Built Rental Exemption
What is Purpose Built?
Purpose-built rental housing refers to apartment buildings designed as long-term rental housing. Purpose-built rental forms the primary rental market housing stock. They offer more housing security than the secondary market rentals, whose owners may decide to use the unit for their own purposes.
The 2023 Budget included a limited exemption for purpose-built rental buildings, that may limit the tax payable on values over $3,000,000.The 2024 Budget builds on this exemption and provides an exemption from the PTT on purchases of new qualifying purpose-built rental buildings.
4. New “Flipping Tax”
A new tax targeting home flipping activity and short-term speculation will officially begin on January 1, 2025. This tax will apply on the sale of residential property held by an owner for less than two years, with the seller being taxed up to 20% of the income from the sales. To specify, properties sold within one year of purchase are taxed at 20% and will decline to zero between 366 and 730 days. Exemptions may apply in certain circumstances.
These provincial changes make for an ideal climate to buy or sell. Take advantage of the flourishing spring market, and contact us!
1-866-796-8899
SOURCES
Building rental housing. City of Victoria. (n.d.). https://www.victoria.ca/node/2326#:~:text=Purpose%2Dbuilt%20rental%20housing%20refers,unit%20for%20their%20own%20purposes.
Chan, K. (2024, February 22). New Property Transfer Tax exemptions for first-time buyers and new homes in BC. Urbanized. https://dailyhive.com/vancouver/bc-new-property-transfer-tax-exemptions
Finance, M. of, Division, R., & Branch, P. T. (2024, February 22). Property transfer tax. Province of British Columbia. https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax
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