Photo: Ian D. Keating/Flickr
As BC home sales activity plummets during a housing downturn, the province may be losing out on hundreds of millions of dollars of previously expected tax revenue.
“[The] property transfer tax revenue forecast is down $150 million due to slower housing market activity reflecting a lower number of transactions,” reads the BC government’s second quarterly report for the 2018/2019 fiscal year.
In the first quarterly report, the government had already downwardly revised the projected revenue by $250 million, so the latest downgrade brings the expected shortfall to a total of $400 million.
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In total, the province is forecasting the property-transfer tax will line government coffers to the tune of $1.835 billion, down from the first quarterly projection of $2.235 billion.
Home sales in BC have been plummeting, largely the result of a severe downturn in activity in Greater Vancouver, where roughly half the province’s population is located.
Last month, 1,103 homes sold on the resale market in the area, representing a sharp 39.3-percent decline from the same month a year ago, according to the Real Estate Board of Greater Vancouver.
The province is also forecasting property-tax revenue will total $2.606 billion, $20 million shy of previous estimates.
“Property tax revenues could be affected by… changes in the BC housing market,” the updated quarterly report reads.
Some may be concerned the revenue shortfall could interfere with the government’s affordable housing plans, but one expert notes that the province has other tools at its disposal.
In an interview with Glacier Media this week, Tom Davidoff, director of the UBC Centre for Urban Economics and Real Estate, said, “They (governments) earmark these revenues for specific programs, but ultimately money is fungible, and the economy is strong. Ultimately what matters for spending is the total budget, and they might cut other spending or raise taxes elsewhere.”
A statement from BC’s Ministry of Finance suggests the lower projected tax revenue from a slower pace of home sales is part and parcel with government efforts to improve housing affordability.
“This is in line with government’s efforts to moderate the housing market to make homes more affordable for people,” the statement emailed to Livabl reads.
The BC government will be releasing its 2019 budget next Tuesday, February 19, and it could contain a further revision of tax revenues.