Land buyers in Manitoba are angry, they feel they are being gouged and taken advantage of due to high land transfer taxes. Many first-time home buyers are upset when they find out how much they must pay. Frequent buyers don’t think it is fair that they are charged so much. They often buy property for rentals and the taxes to transfer the land into their name add up quickly. Even those that get a home custom build are dealing with these high costs for land transfer taxes.
The Supreme Court of Canada hasn’t been able to stop it because it is a tax and not a fee. They can only regulate fees. This controversial land transfer fee was implemented in 1987 under the government leadership of Howard Pawley. The land transfer tax fee is calculated on the sale price of the property.
There is an initial cost of $82 imposed plus .5% for the first $30,000 of the purchase price. Any purchase over $200,000 has a 2% land transfer tax amount applied to it. When the tax was first implemented in 1987 the average cost of a home in Manitoba was $80,000 and the tax amount was just over $250. Today, the average home purchase price is $280,000 and that means about $3,400 for the land transfer tax.
The first year it was implemented, the tax generated $5 million dollars for transfer fees. That amount is now up to about $50 million annually which is going to the provincial government! The problem is the tax amount and formula have never been adjusted from when it was first implemented. It doesn’t reflect inflation or the lower population count. It doesn’t account for immigration and the need for affordable housing or design improvements. The government shouldn’t continue to ignore the hardship this high land transfer tax is creating for land buyers.
Compared to other provinces, the Manitoba land transfer tax is significantly higher. It isn’t uncommon for residents to buy a home or other property in one of the surrounding areas because of these high taxes in Manitoba. For example, buying a home for $280,000 in Alberta would result in a land transfer tax of $95 instead of the $3,400 cost it would be in Manitoba.
Several of the provinces waive or offer a reduced land transfer tax for first-time buyers. The other sore spot with buyers in Manitoba is the PST on mortgage insurance premiums has gone up to 8% and it is hurting households. Sadly, many first-time buyers are struggling to come up with the money to pay for the land transfer taxes because they are so high. They already had to cover their downpayment and insurance.
Homebuilders are hit hard by it too; they can’t cover the cost and must pass it along to the home buyer. They know the income is lower in Manitoba than many of the surrounding areas, so it doesn’t sit well with them that this tax is incredibly high. Sellers find the market is tough, many people choose to rent than buy. They simply can’t cover all of the costs they would have to so they don’t pursue home ownership.
One idea is to eliminate this transfer tax for first-time buyers. It gives them a chance to buy a home with less overhead associated with it. Tax brackets could be changed to compensate for inflation. For example, only taxing the 2% for property over $600,000. Putting a cap on homes up to $280,000 would be useful too. When a buyer would know they had a flat rate of $1,000 for example to pay the land transfer tax, it would be easier for them to budget.
Ending the PST on mortgage insurance is also something to promote better economics for Manitoba. Making land transfers affordable is important. Residents of Manitoba feel they are being gouged, and they aren’t happy with it at all. Hopefully, government officials will make positive changes.
- Some of these points were originally made by Graham Lane.