Impact of land transfer tax on first-time home buyers

Over the past few years, WinnipegREALTORS® has raised concerns about Manitoba’s high land transfer tax rate of two per cent for any property purchase above the $200,000 threshold  and how it impacts first-time buyers.


First-time buyers do not have the same advantages of most homeowners who have been able to build up some equity in their homes. The equity not only helps the homeowner to offset the necessary down payment for the next home they plan to purchase, but helps ease the burden of covering required closing costs.

Now, you have to keep in mind the land transfer tax is an upfront closing cost which has to be paid to the provincial government before you can take title to your new home. If you use the example of a $300,000 purchase price, which is not uncommon for a first-time home buyer in 2015, the land transfer tax is $3,650 plus a registration fee of $85.

It’s often the case that a first-time buyer’s income is sufficient to qualify and meet the monthly principal, interest and tax payments required due to attractive  low mortgage rates, but coming up with the down payment and closing costs is another matter. The latter can be the difference-maker on whether a first-time buyer has the funding to purchase their dream home.

When Manitoba introduced the land transfer tax back in 1987, the average house price in Winnipeg was $81,000. There was also an exemption for any properties selling for under $30,000 (still applicable today). So for many purchasers, if they were buying a home up to the average selling price in 1987,  the land transfer tax equated to $250 — a far cry from the situation today, despite people having higher incomes.

Most Manitobans understand this tax, which has been in existence for nearly 30 years, should have now been indexed to take into account higher housing prices.  With the majority of homes now selling above $200,000 — the point at which the highest threshold tax rate of two per cent applies — it does not take long for the land transfer tax to take a bite out of the affordability equation for first-time home buyers. For every $50,000 above $200,000, the buyer must pay an additional $1,000 in land transfer taxes. 

It is also worth noting that in 2009 the federal government introduced a $750 first-time home buyer tax credit. It does help reduce the land transfer tax burden in Manitoba, but is not available  at the critical time of purchasing a home. This when the benefits of a first-time home buyer would come into play.

Other provinces, such as British Columbia and Ontario, recognized a first-time home buyer exemption was necessary and have had one in place for many years.

 British Columbia has increased its first-time home buyer exemption threshold level on different occasions as that province’s government is sensitive to the needs of first-time buyers and making homeownership possible. They also understand that first-time buyers are critical to ensuring that the housing market —an important economic driver of the economy — remains active.

First-time buyers are counted upon every year to generate housing sales activity and the economic spin-offs that comes with every home sale. The Canadian Real Estate Association estimates that in 2015, the economic spin-offs of home sales via its MLS® systems will amount to a total of $24.8 billion.

In a June 2015 report by the Canadian Association of Accredited Mortgage Professionals (CAAMP), profiling home buying in Canada, it was indicated that approximately 45 per cent of 620,000 home buyers were first-time buyers. 

This does not take into account all the additional sales that first-time buyers enable as a result of their home purchase. A domino effect results from a first-time home buyer purchase, rising all the way up to a seller of an existing home buying or building a brand new home.

WinnipegREALTORS® has expressed concern about the diminishing number of first-time buyers in the housing market due to impediments such as Manitoba’s land transfer tax. They should be given every available advantage to continue to make up a significant segment of the home-buying public.