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Changes in the House at the BC Legislature this summer will mean changes in the housing sector too. Here are five ways we expect British Columbia residential real estate to be affected as a result of the ushering in of a new BC Government:
The foreign-buyer tax of 15% on purchase price of real estate was imposed by the Liberal provincial government in August 2016. The government’s primary goal was to slow the growth in the cost of housing in the Vancouver area, and the initiative has garnered attention around the world.
While this new tax resulted in an initial slow-down of housing purchases by foreign buyers, purchases subsequently rebounded. As a result, and with the NDP in power, supported by the Green Party, we can expect a review of the foreign-buyer tax, potentially with two-fold results:
The foreign-buyer tax also affects commercial real estate transactions.
The Green Party has also proposed a new system for property transfer tax (also called the “PTT”) — a tax that is paid by the buyer. There would be a sliding scale for the tax rate, tied to the value of the property in question.
Canadian residents in other provinces are also eyeing the benefit of the growing value of real estate in BC, particularly with a view to buying and then selling as soon as its value has grown sufficiently. This practice of speculating has led to the proposal of a real estate speculation tax on a purchaser in, for example, Ontario, who buys a home in BC yet does not pay taxes in BC.
Add to this, the Green Party’s proposal to tax lifetime capital-gains in excess of $750,000 on BC primary residences, if those properties are purchased and then sold again in less than five years, and it is clear that addressing real estate speculation is high on the list of priorities for this new BC government.
Hand-in-hand with housing purchases and speculation, is the issue of empty homes and condos. The Green Party has proposed the use of a surtax on properties for which the owners cannot produce proof of rental income nor proof that they pay income tax in Canada. The City of Vancouver is already assessing measures it can take to discourage purchasers from leaving homes vacant.
Above all, British Columbians involved in residential real estate transactions of any kind can expect, for both new regulations and existing ones, stricter enforcement.
British Columbia’s two largest cities are growing, with housing demand exceeding supply. One idea to mitigate the housing shortage is to relax zoning rules, thereby increasing opportunity for higher density housing.
Residents in Victoria and Vancouver living in neighbourhoods currently zoned for detached homes can expect to see their skylines change. Furthermore, construction of high-density housing along transit routes is already underway (Cambie Street corridor in Vancouver is one example) and favoured by the NDP and the Greens as an ongoing objective.
The NDP and the Green Party agree that a new supply of affordable housing needs to be created quickly. In addition, the Green party spoke of the provision of government-subsidized affordable housing.
In reaction to the election results, the Liberals took the subject of affordable housing one step further. The Liberals announced they would “work with the private sector to build 50,000 units of new housing across the province over 10 years that will go into a new Rent-to-Own home program available to middle class families. The program would help middle-class renters grow equity through their monthly rent payments until they are in a position to own the home.”
Regardless of the composition of politicians in the House this fall and beyond, we can expect action on this topic.
The BC Home Owner Mortgage and Equity Partnership, known for short as the “BC HOME Partnership program” is a repayable, down-payment assistance loan set up by the BC Liberals. It is intended to help Canadian citizens and permanent residents who are prospective first-time homebuyers get into the real estate market. The Liberals launched the program in early 2017.
Due to criticisms by economists that this program could increase housing prices and put individuals into further debt, the BC HOME Partnership program is expected to be reviewed, and then changed or eliminated by the new NDP leadership, with support from the Green Party.
Whether you’re a real estate buyer, a seller, or a rural or an urban dweller, the old mantra may still be “location, location, location” but the new watchwords will be taxation, speculation, housing creation, and densification.
The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.