Realtors question new taxes
Image: The Canadian Press
The provincial government made bold moves in its recently tabled budget aimed at tempering the soaring cost of real estate in parts of the province.
Along with ponying up billions of dollars for affordable housing over the next ten years, the government expanded the reach and increased the severity of the tax on foreign homebuyers and announced a new “speculation tax” it says will target people who own homes in B.C. but don’t live here full-time.
Get more details on the changes here.
While Finance Minister Carol James said the changes will begin to fix the “housing crisis” plaguing the province, many local realtors are more than dubious.
Not addressing fundamental problem
Tanis Read, the president of the Okanagan Mainline Real Estate Board, says the bevy of new taxes might make the government look good, but they don’t properly address the fundamental problem driving up home prices in the province.
Kelowna realtor Mark Walker agrees.
“I don’t think that you can control prices with tax. You can only control prices with supply,” he says.
As local realtor Bill Hubbard explains, home prices continue to go up in B.C. because there aren’t enough homes on the market, meaning buyers are competing with one another and driving up the prices.
Hubbard says that, in many municipalities, developers have to go through an “incredibly arduous” process to get new homes on the market, and that slow pace is keeping supply low.
The new budget, he says, doesn’t do anything to address that.
“We need developers to come to the table, see a piece of land, plan out a development, and be able to see profit at the end,” Hubbard says.
Developers aren’t seeing that happen, but “if there was something in the budget that would allow for a decrease in the time and risk capital that has to come to the table before a developer actually knows they can proceed with the development, I think this would seriously enhance the province’s ability to increase the inventory” and bring down prices.
Targeting the wrong people?
However, Read says the government is instead heavily taxing homeowners who don’t live in the province through a speculation tax, and that could force those people to pack up and leave, taking the money they would otherwise have spent in local communities with them.
She pointed out that about 10 per cent of buyers in the Okanagan are from Alberta, and will likely get hit by the new speculation tax. Many of them aren’t ultra-rich vacationers but average people who are retiring to the Okanagan or work in the oil fields.
Walker says he believes taxing speculators is a good thing, but “to just tax people that are planning their retirement, or to tax people that have properties to just try and grow their portfolio a little bit, I don’t think that’s necessarily the person that’s calling the problem.”
“These rules are not going to change things that much, because the problem is not what they (the government) think the problem is,” Walker adds.
Consequences ‘beyond what they intended’
Becuase of that, Read says the government’s taxing strategy could end up having consequences beyond what it intended.
“Every time government interferes it always causes different effects than they intend it to,” she says.
Read points out that the Okanagan real estate market was “already starting to stabilize” before the budget was released, with the thousands of new units coming to the market over the next couple of years set to have a “significant impact” on home prices.
“And then what happens? How will the government be accountable if they provide the catalyst to some kind of adjustment that leads to all kinds of empty buildings?” she asked.
“My concern is that industry wasn’t consulted. Where are the facts and data to support this?”
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