Below is the current government’s answer to “cooling” the over-heated housing market.
The debate about British Columbia’s overheated housing market, particularly in the Vancouver region, has focused on concerns over speculation, foreign ownership and flipping – which many believe have all conspired to drive up costs so much that many people will simply never be able to afford to buy a home.
The latest budget includes several measures intended to increase housing supply, allow first-time buyers to enter the market, and finally measure the prevalence of foreign ownership.
They include:
- An increase in the property transfer tax for luxury homes with a new tier of three per cent on the portion of a purchase above $2-million. That is on top of the current rates, which impose a one per cent tax on the first $200,000 and two per cent for the portion between $200,000 and $2-million.
- At the same time, there is a new exemption for newly constructed homes, which will mean the property transfer tax won’t apply to new homes below $750,000. A partial exemption will apply for homes between $750,000 and $800,000. Those exemptions only apply for Canadian citizens and permanent residents purchasing their primary residence. The first-time home buyer program, which provides exemptions and reductions for houses below $475,000, remains in effect.
- The province will track foreign ownership by requiring anyone purchasing a residential property to disclose whether they are a Canadian citizen or a permanent resident – and, if not, where they are from. The requirement also applies to directors of corporate owners.
- Bare trusts will be required to disclose their beneficiaries.
- The province’s surplus is projected to be $264-million for 2016-2017, increasing to $373-million by 2018-2019.
- The government is projecting GDP growth to be 2.4 per cent in the coming year, which the finance minister says is the highest in the country.
- B.C. will start its so-called “prosperity fund” this year with a $100-million deposit, which can be drawn upon in future years to pay down debt and fund services. The account was intended to be funded by liquefied natural gas revenues, but the province still does not have an LNG export facility up and running. When the government withdraws money out of the fund, half of the money taken out must be used to pay down the debt.
- The budget does not account for any revenues from the liquefied natural gas industry and notes economic conditions have slowed progress on the file. In 2011, the Throne Speech predicted the first export facility would be up and running by the end of 2015, but that did not happen.
Here are my thoughts:
– An increase in property transfer tax over $2M will impact local buyers (a family with 2 kids who now want to stretch to get into a single family home). It is unlikely that the additional 1% will curtail offshore buyers looking for a safe haven to invest in real estate.
– Why not exempt all homes below $750,000 from property transfer tax? I haven’t heard of, or read any documentation about local developers putting a break on building lately, so why just new builds? The buyer should be the one to decide what they want to buy old or new – and still be able to take advantage of the incentive.
