By Walt Harvey (R), East Oahu Realty, ABR, CRS, GRI, SRES, ePRO, QSC

Two bills that increase the Conveyance Tax survived this Legislative Session; SB179 & HB1308 have been sent to the Governor and will substantially increase the cost of selling real property in Hawaii. Originally intended to defer the costs to the County for processing a transfer of ownership in real property, the conveyance tax is now viewed as another revenue source and a funding mechanism.

Currently, a seller or transferor of real property is assessed $.10 per $100. HB1308 will institute a sliding scale and charge $.20 per $100 on sales of $600,000-$1,000,000 and $.30 per $100 on sales above $1,000,000. In addition, if the purchaser is ineligible for a county homeowner’s exemption on property tax, an additional $.05 per $100 is added for all sales. This includes not only mainland purchasers but local investors as well.

For example, currently a property seller of a $745,000 will pay a $745 conveyance tax, regardless of who purchases the property. Under the new legislation, the seller will pay $1490 if sold to a resident purchaser or $1862.50 if sold to a non-resident purchaser. Will we start to see two different asking prices for property, one price for residents and a higher price for non-residents or local investors?

Proponents of the legislation say the increases will only affect about 8% of the sales. Wrong! The Honolulu Board of Realtors© First Quarter 2005 reports 976 single family home sales on Oahu of which 281 were from $600,000-$1,000,000 and 119 were over $1,000,000. That's 41% that would have been affected. This does not take into account sales of condos, apartments, land and for non-resident purchasers which would undoubtedly raise the affected percentage even higher.

The next time you hear your legislator talk about the need for more affordable housing, ask them how they voted on SB179 and HB1308 and how raising the conveyance tax makes housing more affordable.

Published in Small Business Hawaii, June 2005

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