Photo: Kyle Pearce/Flickr
The BC government is cracking down again on real estate speculation in the province, as part of its 30-point plan for a fairer housing market.
On Tuesday, the NDP government unveiled its 2018 budget, which emphasizes the need to tackle housing affordability — as home prices in the province, particularly the Lower Mainland, continue to skyrocket.
Included in the comprehensive plan is a new annual speculation tax on residential properties, which will target foreign and domestic speculators who own residential property in BC, but don’t pay taxes in the province.
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“This will penalize people parking their capital in our housing market simply to speculate, driving up prices and removing rental stock,” said BC Finance Minister Carole James, in the budget speech on Tuesday.
Beginning in fall 2018, the tax rate will be 0.5 per cent of taxable assessed value for the 2018 tax year and two per cent in the following years.
The tax will apply in Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts, and in the municipalities of Kelowna and West Kelowna.
Although the BC government believes the new levy will help curb demand, the British Columbia Real Estate Association (BCREA) says the tax will unfairly impact certain buyers.
“Of additional concern, the “speculation” tax introduced in the budget will affect British Columbians who own or want to invest in those markets by buying a second home or recreational property,” writes the BCREA, in a press release.
But will the tax effectively deter speculators in BC’s housing markets?
Vancouver realtor Adil Dinani says the levy could cause a short-term shock — similar to when the foreign buyer tax was introduced in Metro Vancouver in August 2016 — but likely it won’t have a long-term effect.
“I think it may cool that activity down a bit but I don’t think it will remove it from the equation. I still do believe we are going to be in a very active market, especially in that lower end of the market,” says Dinani.
Another point laid out in the government’s housing plan is a five per cent increase to the foreign buyers tax originally introduced in 2016, raising it to 20 per cent. Effective today, the tax boundaries will also be extended outside of Metro Vancouver to the Fraser Valley, Nanaimo, and Capital and Central Okanagan Regional Districts.
Vancouver realtor Steve Saretsky says the levy will definitely shock many of the new markets, such as Victoria and parts of the Fraser Valley, “which are still experiencing extreme frothiness.”
“While details are murky it has the possibility to discourage foreign investment even further, although it’s likely too early to tell until all the specifics are announced. It should also encourage homeowners to rent out vacant units,” writes Saretsky in a blog post.
When analyzing the impact of these new taxes on BC’s housing market, the BCREA says it’s unlikely that these measures will “stabilize the housing market.” Instead, the association argues that the housing plan should focus on an approach that balances demand and supply.
“The taxes ignore the major culprit – matching housing supply and demand within a reasonable timeframe. Additional taxes, whether targeted at foreign buyers or speculators, do not reduce the gap between when a housing project starts, and when it is available to purchase,” says the BCREA.