The BC NDP Government has been active to start 2024. Last week, the provincial budget was tabled, and a couple big changes are coming to the real estate market.
Updates to the Property Transfer Tax (PTT) Framework
The 2024 provincial budget the BC Government is making three significant changes to the PTT Framework
1. Increase the Fair Market Value Threshold for the First Time Home Buyer (FTHB) Exemption:
Currently, the FTHB full exemption applies to properties with a fair market value (FMV) of less than $500,000, with a partial exemption for properties with a FMV of $500,000 to $525,000.
As of April 1st, 2024, the FTHB exemption will apply to properties in a different way. 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.
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.
If the FMV of the property is over $860,000, then there is no FTHB PTT exemption.
2. 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. The phase out range is $50,000 above the threshold, so 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
The 2023 Budget included a limited exemption for purpose built rental buildings, that may limit the tax payable on values over $3,000,000. Budget 2024 builds on this exemption and provides an exemption from the PTT on purchases of new qualifying purpose-built rental buildings.
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 1 year are taxed at 20%, and will decline to zero between 366 and 730 days. Exemptions may apply in certain circumstances.
As with most legislation, other conditions may apply and there is some nuance to the above summary. Please do not hesitate to contact our lawyers if you have any questions on the above.