Changing tax legislation is affecting the B.C. residential market in numerous ways. Increasing taxes on properties $3 million and up are affecting sales. Speculation penalties are targeting vacant homes and discouraging foreign investors. These factors, among others, are causing uncertainty in the market, and are considered to have contributed to the 27% sales volume loss recorded by the Real Estate Board of Greater Vancouver (REBGV) in August 2018.
Michael Ferreira, of market research firm Urban Analytics Inc., observes that developers are pulling back following this uncertainty, with a number of projects now on hold, and REBGV statistics indicate that reduced resale listings have caused prices to rise as much as 4% in the Lower Mainland (for detached homes).
B.C. Finance Minister Carole James will release details of the speculation tax later this season, but the proposed intent is to target properties sitting vacant for more than 6 months of the year. This is intended to direct real estate rewards to B.C. locals, opposed to those using the residential market for pure investment. The speculation tax was introduced when it became evident that non-resident investors were driving prices up. Consequently, the legislation is focused on Metro Vancouver, Capital Regional District, Kelowna-West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission owners, with other areas being exempt.
Candidates on Tax Rates
It seems there are lower numbers than expected of vacant homes found via audits so far (1.8% in Metro Vancouver), and most mayoral candidates are keeping their silence on the issue, as the scheme may not be as beneficial to local owners as originally thought. Ian Campbell (Vision Vancouver) states that he will boost the tax from 1% to 3% if elected, but other candidates such as independent Shauna Sylvester and Yes Vancouver’s Hector Bremner are not expected to weigh in until after the election. It remains to be seen if this tax will be beneficial to the residential market and investors in years to come.
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