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Time to review land transfer tax
Jun 22, 2012

 

WinnipegREALTORS® and the Manitoba Real Estate Association are the only organizations raising concerns about the increasing burden of the land transfer tax (LTT) on Manitoba home buyers. 
When introduced in 1987, the LTT was supposed to be revenue neutral, but that is hardly the case today. 
Joseph Quesnel, a policy analyst with the Frontier Centre for Public Policy, wrote a column recently in the Winnipeg Sun, outlining the same arguments REALTORS® had expressed to bring attention to what is now a shameless cash grab at the expense of home buyers. 
Here are just a few excerpts from his column: 
“Land transfer taxes are inherently unfair. A small segment of the population is purchasing homes yet is paying this large tax that benefits the whole community.
“The tax is quite regressive as it eats into housing affordability, particularly for moderate income households. Land transfer tax is another closing cost. Not a very fair-minded policy for a provincial government that espouses egalitarian values.
“Since a land transfer tax falls only on those who buy and sell property, the burden does not affect all property owners. An economic case can be made that taxes on property values are justified, since the government services they fund indirectly enhance those values. No such connection can be made to a tax on title transfers, especially when that tax is applied in addition to property taxes.
“But even in the jurisdictions that have a similar punitive land transfer tax, there is some relief for first-time buyers in the form of generous exemptions and rebates. Manitoba lacks any relief.”
Last week, Susan Burkett wrote a letter to the editor complaining about how much in LTT she had to hand over to the provincial government on two homes she purchased this year. One house, which she paid over $400,000 to purchase, cost her $6,700 in LTT. She found out  from the land titles office that the big difference in the amount paid in LTT for higher-priced properties had nothing to do with the necessary paperwork. Of course, it begs the question why not implement a flat fee, which is more in line with what was the case before the land transfer tax was brought in 1987.
With house prices going up as much as they have in Winnipeg over the past number of years, and the fact that Manitoba has the highest land transfer rate in the country at two per cent for any home value above $200,000, the impact of this tax is far greater today than it has ever been. Based on the May 2012 average MLS® sales price of homes sold in southwest Winnipeg of $363,700, a purchaser had their pocket lightened by the LTT to the tune of $4,924. 
Anyone who has just purchased a home for any myriad of reasons, knows that the LTT they had to come up with upon closing a purchase could have been invested in the local economy, in order to help them with the house move and making their new home a proper fit for their own situation.
So what can you do about it? Do as WinnipegREALTORS® is suggesting and go to 2muchltt.com and send the letter as written below to Finance Minister Stan Struthers. The more Manitobans who speak up about how unfair this tax is and its impact on housing affordability, especially for first-time home buyers, the greater the chance we will see an adjustment in the tax in a future provincial budget: 
High time to review unfair home buyers’ tax
“The land transfer tax is a major impediment for Manitobans to buy a home. It is hard enough to save enough money for the required mortgage down payment let alone other closing costs without having to come up with another $3,650 in additional closing costs for a home priced at $300,000. 
“How can you leave a tax unadjusted for 25 years?  When the tax first came out, the revenue neutral fee was used to pay the clerical administration costs at Land Titles Office of approximately $250. Now, with the large growth in our property values, we pay a much greater amount, which severely impacts home buyers’ (especially new home buyers) ability to finance even an average priced Manitoba home. 
“Homeowners already pay significant property taxes on their home. The land transfer tax is simply another tax on the same piece of property. 
“The land transfer tax rate of two per cent for any purchase amount over $200,000 is far too much and has resulted in our province having the highest land transfer rate in the country. It can often mean the difference of having to remain a renter, as the land transfer tax can literally put a new home out of reach for potential home buyers.
“As mortgage brokers or REALTORS® can tell you, the difference between qualifying for a loan — or not qualifying for a loan — may be a few thousand dollars or the amount of the land transfer tax. At the very least, the land transfer tax should be waived for first-time home buyers. Doing so would help free up rental units for Manitobans (especially for new immigrants) unable or not interested in owning a home at this time.
“The outrageous amount of Manitoba's land transfer tax is punitive to anyone, other than the well-off, who wants to own a home. For many, it has become one of the largest single tax payments they will make in Manitoba. It is time for you to listen to Manitobans and take action on this unfair tax.”