After a long period of uncertainty surrounding the policies of the newly appointed NDP Provincial Government, the 2018 budget has finally been released. Here are what we believe to be the most significant changes pertaining to real estate.
#1: TAXING SPECULATORS WHO ARE DRIVING UP HOUSING COSTS
People, including many non-residents, are speculating in B.C.’s housing market, using our housing stock as an investment vehicle that drives up prices and removes rental stock. Starting in fall 2018, the Province will introduce a new speculation tax on residential property. This tax will target foreign and domestic speculators who own residential property in British Columbia, but do not pay taxes here. This includes those who leave their units sitting vacant and will be applied to nearly all communities in British Columbia.
The Province will also introduce a non-refundable income tax credit which will allow those who pay income tax in B.C. to offset the new property tax. This bold new tax was created in hopes of creating a market that serves local residents more than it serves foreign speculators.
#2: INCREASING THE FOREIGN BUYERS TAX
The 15% foreign buyers tax alone has been insufficient to stabilize the housing market; foreign demand is still putting pressure on our housing stock. That’s why the NDP is increasing the foreign buyers tax (additional property transfer tax) rate from 15% to 20%. Increasing the tax will help deter those speculating in B.C.’s housing market, and penalize those who do. According to them, property owners who enjoy our services should pay their fair share of taxes.
#3: EXPANDING THE FOREIGN BUYERS TAX TO MORE AREAS
Our government is also extending the reach and impact of the foreign buyers tax to the Capital Regional District, the Fraser Valley, the Central Okanagan and the Nanaimo Regional District. Extending it to other communities ensures that speculation isn’t pushed into neighbouring markets. The increase and expansion of this tax will help stabilize housing prices and raise revenues to help fund housing affordability measures in our province.
#4: PROPERTY TRANSFER TAX INCREASED ON HOMES OVER $3 MILLION
Speculation has led to distortions in our housing market, raising prices and turning homes into commodities. These rising housing prices have benefited many people. In the eyes of the NDP, those who have benefited the most from the rising real estate market should contribute their fair share. That’s why our government is raising taxes on the province’s most expensive homes. The first step is to increase the property transfer tax to 5%, up from 3% on the fair market value that is over $3 million on residential properties.
#5: INCREASING THE SCHOOL TAX RATE ON HOMES OVER $3 MILLION
Starting in January 2019, the Province will be increasing the school tax on homes that are assessed over $3 million. This new tax will apply only to the value in excess of $3 million. These last two measures will not only ask the wealthiest to contribute a little bit more, but they will help to stabilize housing prices. The revenues from these increased taxes will be distributed to address housing affordability in our communities.
Why Does this Matter?
With public pressure mounting on topics such as foreign ownership, tax evasion and an increasing housing affordability crisis, the new 30-Point Housing Plan was widely anticipated by both land owners and developers as a possible solution to an overheated market. Although most of these new regulations will come into effect in the fall of 2018, an immediate effect will surely be felt as developers and investors brace for the coming changes.