How does the BC Budget Affect the Real Estate Market?
The NDP Government’s new Budget was announced today and though there are some big changes to take note, I don’t see any changes that will affect the housing market for most Buyers and Sellers in Vancouver, or the rest of the province.
Keys BC Budget Items about Real Estate
1. Changes to the Foreign Buyers Tax
This is the biggest change in the new BC Budget. There will be an immediate increase to the foreign buyer tax from 15 per cent to 20 per cent, and an expansion to Kamloops, Kelowna, Greater Victoria and the Fraser Valley. I’ll be waiting for more clarification on exactly which areas are included, though this is a big change as foreign buyers who were looking to invest in other busy areas of the province will now have to pay the tax, else, they’ll all be pushed to the other areas of the province where the tax isn’t applicable (i.e. is Whistler and Squamish included? If not, I’d imagine these areas will see some foreign investment dollars). This change comes into effect immediately, which means foreign buyers who are already under contract to purchase a home, but haven’t completed yet, will be forced to pay the tax.
2. Increase in property Transfer Tax on Properties over $3-million
A hike on the property transfer tax on Feb. 21 from three per cent to five per cent on residential properties worth more than $3 million, as well as an increase on school taxes. The new calculation of the property transfer tax is:
- 1% on the first $200,000,
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
- 3% on the portion of the fair market value greater than $2,000,000, and
- if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).
This won’t make a difference to anything less than $2.5-million, though the Government will now have a bit more money to spend on other housing initiatives.
3. Crackdown on Fraud and Speculation
The NDP Government had previously released some damning information about the amount of Fraud happening through Casinos and Real Estate, so we knew they were going to put a lot of effort into ensuring the loop holes are closed while cracking down on fraud and tax evasion in the housing market. We are still waiting for exact details on what this “speculation tax” will be, but they said the new tax will be on those who buy B.C. properties but don’t pay income taxes in the province, with exemptions set for primary residences and rental properties.
Along the same lines, they will be creating a new database on pre-sale condo assignments to make sure taxes are paid on pre-sale flips, i.e. capital gains and potentially property transfer ta? We’ll have to wait to see what the exact details of this new rule will allow.
4. Help for Renters
The NDP Government has already closed the Fixed Term Tenancy loophole by not allowing any fixed term leases (so every lease going forward is month to month, except in extenuating circumstances), but there will also be looking at toughen rental laws while allowing strata corporations to levy more fines and penalties against those who break the rules.Having said that, the City of Vancouver has approved short term rentals (as long as Owners follow strict rules and pay appropriate taxes) though it will be interesting to see if Stratas continue to forbid short term rentals in their buildings.
5. Mortgage/Financing Changes
The NDP Government has cancelled the Liberal-created B.C. Home Owner interest-free mortgage program for first-time buyers, using that money (already collected) to create a new “Housing Hub” agency that will work with non-profit groups, churches and the private sector to find land for housing projects. This was a useful program, but not many Buyers could benefit from it, so I don’t think this will have a big impact. Unfortunately for those few Buyers who needed the extra down payment help to get into the market, this doesn’t help.
Give me a call at 778-387-7371 or email me at [email protected] if you have any questions.
