Photo: Leeann Cafferata/Flickr
This week, new details regarding BC’s speculation tax were unveiled, but some critics are saying more answers are needed on how the levy will impact the province’s homeowners.
“It’s unnecessarily penalizing people who already pay [Canadian] taxes. Why do we need to pay more taxes?” Vancouver mortgage professional Sabeena Bubber tells BuzzBuzzNews.
Last month, the provincial government announced a new speculation tax as part of its 30-point Housing Plan aimed at curbing demand and addressing eroding affordability across the province, particularly in Metro Vancouver.
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“We are going after speculators who are clearly taking advantage of the market, leaving homes vacant and driving up prices,” said BC Finance Minister Carole James, in a press release, published Monday.
The tax was met with public backlash, with many wondering if the levy would unfairly penalize British Columbians who own second properties, such as cottages and rental homes.
On Monday, the BC government responded to these concerns by announcing specific details regarding the tax, including a rate design, a refined set of geographic areas that would be subject to the tax and a list of eligible exemptions.
According to the British Columbia Real Estate Association (BCREA), the BC government didn’t thoroughly explain how it plans to minimize the impact of the tax on affected homeowners who do pay income tax in Canada.
“For example, homeowners in the City of Vancouver could potentially be charged twice for leaving their homes vacant: once by the city and once by the province,” reads a statement from the BCREA, published Tuesday.
Beginning in fall 2018, the tax rate for all non-exempt properties is 0.5 per cent of the property value. In 2019 and subsequent years, the tax rate will be two per cent for foreign investors and satellite families, one per cent for Canadian citizens and permanent residents who don’t live in BC and 0.5 per cent for British Columbians who are Canadian citizens or permanent residents.
Bubber says the tax negatively impacts out-of-province homeowners in BC and could push them away from housing markets affected by the new levy.
“Albertans might not be able to afford owning property in those regions anymore and they are a huge supporter of those economies and those regions are actually quite worried,” says Bubber.
Instead of a tax penalty, BCREA says the government should consider providing incentives for homeowners to rent their properties.
In addition, the association says more information is needed regarding the levy’s potential impact on the economy.
“Communities could face economic problems, due to fewer visitors, less consumer spending and lower housing prices,” says BCREA.
In a recent blog post, Vancouver realtor Steve Saretsky says the levy could be bad news for Vancouver’s slumping detached home segment.
“With Vancouver detached sales hitting a twenty year low in the month of February it’s hard to imagine this bodes well for a segment already under siege,” he writes.
Instead of creating new property taxes, Bubber says the government should focus on creating more housing supply in the province.
“These taxes are there but they haven’t addressed the fact that we don’t have enough multi-family housing, and that we have a growing population,” says Bubber.