Will the new British Columbia budget heavily impact the real estate market? Here’s what you need to know.
Today, we’re going to discuss the new BC budget and what the potential impacts are to our real estate market.
1. Foreign buyers tax. The foreign buyers tax has increased from 15% to 20%. The interesting part is that it now includes us, where we were exempt before.
2. Property transfer tax. Properties over $3 million will now have a 5% transfer tax. If you buy a $3.5 million house, you’ll see about another $2,500 on your transfer tax bill. Is that going to dissuade someone at that price point? Not likely.
3. The BC Home Partnership program, which was giving first-time buyers a hand up, will be eliminated. I think that was a little short-sighted on the part of the BC government. However, our experience in working with a number of first-time buyers shows that the vast majority were not actually taking advantage of the program.
4. Vacant property tax. As of 2019, they will be imposing a $20 fee for every $1,000 valuation on your property. For a $500,000 vacant home, this would add $10,000 to the property taxes. This would levy a very large, annual tax burden to an owner who leaves those homes vacant.
Let's analyze who this might affect. Firstly, it’s important to know that roughly 20% of buyers in the Okanagan are actually from outside of British Columbia, and those in BC are the only ones this will affect.
"It won’t send the market into a tailspin, but rather create some interesting conversations over the next three to six months."
Secondly, it’s also important to realize that less than 2% of our Okanagan market sells to a foreign buyer, so it probably isn’t enough to make a huge impact.
Additionally, of all the homes that change hands, roughly 6% of those are of a recreational nature. These are the types of properties that are typically left empty.
Overall, only small percentages of the market will be affected, particularly in a tight inventory market like this one. Even if a large quantity of these homes came on the market, it wouldn’t be enough to put downward pressure on pricing.
Looking at the real number of vacant properties downtown, there are 470 units, according to the last census. The Mission has another 380 or so vacant units.
These folks now have to make a decision: Should they rent it out and avoid the tax, or should they forgo the hassle altogether and just sell it?
There could be some of these properties coming on the market, but, as I said, it’s unlikely to drive our market down. However, it may pose some significant challenges for some who have invested and worked hard in their life to be able to invest in a second home.
That’s the unfortunate effect of the short-sighted BC budget that was rolled out, but don’t panic. The moral of the story is that it won’t send the market into a tailspin, but rather create some interesting conversations over the next three to six months.
If you have any questions about this, please feel free to reach out to me. I'd be happy to help you.