When Cliff King, former president of WinnipegREALTORS® and the Manitoba Real Estate Association, recently spoke out publicly about the negative impact of Manitoba’s land transfer tax, it was not part of the campaign both of these real estate associations have joined forces on to bring attention to the unfairness of the tax. In King’s capacity as the broker/owner of RE/MAX executives realty, he made land transfer taxes a central issue for Winnipeg in a RE/MAX 2014 Spring Market Trends Report.
Clearly, King would have preferred to talk about something else as Winnipeg’s featured trend. In the RE/MAX national report, he said, “Manitoba’s land transfer tax continues to be a particular burden on first-time entrants to the market.”
Let’s not forget some of the other difficult circumstances all Winnipeggers encountered, for example, a frigid winter, but most repeat buyers at least had some equity going into their house purchase. First-time buyers or new entrants to homeownership are not so fortunate. They not only have to come up with the down payment but save enough to cover up front closing costs such as the provincial land transfer tax.
One reason that the land transfer tax isn’t an issue for first-time buyers in other Western Canadian provinces and in Ontario is that they either do not have a land transfer tax or their provincial governments offer generous first-time buyer exemptions. In this year’s B.C. provincial budget, the first-time home buyer land transfer tax exemption was increased from $425,000 to $475,000. An exemption for first-time buyers has been in place for 20 years.
Manitoba, which brought in its land transfer tax around the same time in the late 1980s, has never offered a first-time home buyer exemption. In fact, the government in 2004 increased the highest tax rate from 1.5 per cent to two per cent for any house price value over $200,000. Ontario also has a two per cent tax rate, but it applies only to a house valued over $400,000.
The Manitoba government likes to use the excuse that our house prices are much more affordable than other housing markets, but that is no longer the case. For the past decade, the Winnipeg market region had six straight years of double-digit price increases. In March 2014, the average MLS® single-family home sale price for all of southwest Winnipeg was $390,000. This translates to $5,450 in land transfer taxes. Even if the average house price was $100,000 for southwest Winnipeg back in 1987, the land transfer taxes would still be less than $500.
“The balanced housing market is primed for buying, but King said there is still one big deterrent (Winnipeg Sun). ‘Land transfer taxes,’ he said. ‘For first-time buyers, forking out $4,500 for a tax alone has a more adverse affect.’
“King said that REALTORS® try to inform buyers right off the top and warn them the tax needs to be factored in, but it can be a deal-breaker for some people.
“‘It’s the same formula and same rate from the ’90s when houses were in the $80,000 range,’ said King. ‘The tax turns away first-time buyers that don’t have the money together on top of compiling costs.
“‘And they are the engine of the whole market,’ said King.
“‘If they don’t get into it, the next group can’t move up to a bigger house,’ he said. ‘It has a trickle-down effect of hurting the whole economy.’”
While his counterparts in other cities were talking about why confidence is high and people are making lifestyle choices to move to their markets, King felt compelled to criticize a land transfer tax that is inhibiting the health of Winnipeg’s housing market and the economy as a whole.
Just next door in Saskatchewan, RE/MAX highlighted the importance and strength of new entrants into Saskatoon’s and Regina’s housing markets. In Regina, young professionals are choosing to stay and purchase their first home. For Saskatoon, entry-level properties under $400,000 saw the most activity in January and February.
If you think Manitoba is being singled out in particular for its tax on first-time buyers, you are right. That’s why high-profile companies such as RE/MAX are willing to speak out about it. Their REALTORS® see the direct impact of the tax every day that they’re on the job.
For more information about Manitoba’s land transfer tax, go to 2muchltt.com