Despite amendments to B.C.’s speculation tax that were announced on March 26, the provincial government’s new housing taxes “should not be taken lightly,” says Phil Soper, president and CEO of Royal LePage. “Homeowners across the province will feel the effects as major policy changes like this are also amplified by a drop in consumer confidence. We saw this happen in 2016 when the previous government launched a tax on foreign investors. A small number of international purchasers withdrew from the market – along with a huge cohort of domestic homebuyers.”
The new policies include the introduction of a speculation tax on qualifying secondary homes, an increase to the foreign buyer tax as well as an expanded list of affected regions and an increase to the property-related school taxes and land transfer taxes on homes worth over $3 million.
“While the size of the new taxes has been reduced modestly in one of the categories, the entire scope of the new tax regime remains in place,” says Royal LePage in a news release. A Royal LePage survey of 535 real estate professionals in British Columbia and Alberta found the taxes “have the potential to significantly impact the province’s residential real estate market. While previous provincial measures have targeted foreign homebuyers, the implications of the new tax policies will be much more widespread, primarily affecting domestic homeowners located in B.C., Alberta and other parts of Canada who have made the tourist-focused region their second home,” says Royal LePage.
Eighty-five per cent of those surveyed who are operating in British Columbia said that the new tax policies have hurt consumer confidence in residential real estate across the province. A further 78 per cent said home sales will decrease within the first three months of the announcement of the new policies, while 57.3 per cent stated that prices will also decrease during the same period.
“Canadian homebuyers from coast-to-coast were already struggling with new federal restrictions on access to mortgage financing,” says Soper. “We expect the impact of the new government’s housing tax policies to be even more pronounced as they will force Canadians, Americans and potential buyers from elsewhere in the world out of the market.”
While 77 per cent of those surveyed said that the provincial regulations will cause interest from international purchasers to decrease, this demographic was ranked last when respondents identified the group that was most impacted by the new policies, says Royal LePage. It says 44.8 per cent of advisors stated that the new housing policies most impacted residents of British Columbia, followed by 43.5 per cent who believed it was Canadians who own or are looking to buy property in British Columbia, but predominantly live in other provinces. Only 11.3 per cent of real estate professionals forecast that the policies would impact international purchasers the most.
“We expect that the new taxes will materially impact communities that rely on recreational property markets for the health of their local economy,” says Soper. “There will be some Canadians in British Columbia and across the country that will choose to sell their properties in the province as the new taxes add to the cost of homeownership.
“There are further unintended consequences from these kinds of policy changes,” Soper says. “If property values decline, property tax revenues decline. Local municipalities will have to deal with this added burden.”
