Real estate experts say the B.C. government started to build a strong foundation for more affordable housing in Tuesday鈥檚 budget, but opinion varies on the expected outcomes.
Finance Minister Carole James is trying to ease the province鈥檚 housing crisis by introducing a new tax on property speculators, expanding and increasing a tax on foreign homebuyers and spending $6 billion to build affordable housing over the next decade.
James said she expects to see property values start to drop as her budget measures kick in.
鈥淲e鈥檙e an amazing province,鈥� she said Wednesday after speaking to the Greater Victoria Chamber of Commerce. 鈥淭here鈥檚 no question people are going to want to live in B.C. But we need to see a moderation and my hope is, by addressing both supply and demand, you鈥檒l see more supply in the market that will ease some of the cost pressures and you鈥檒l see a moderation.鈥�
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Cameron Muir, chief economist at the Real Estate Board of B.C., said plans to help build 114,000 affordable housing units will offer much needed supply for rental and low-income properties.
But he said a tremendous undersupply of available homes in Metro Vancouver, Victoria and 琉璃神社, coupled with B.C.鈥檚 strong economy, will keep home prices from dropping.
鈥淚n terms of market impacts, it may be great to raise tax revenue, but this is not going to have a demonstrable impact on housing markets,鈥� said Muir. 鈥淭he chief culprit of rising home prices is the inability to supply the housing market in a timely fashion.鈥�
Tom Davidoff of the University of British Columbia鈥檚 Sauder school of business said he hopes the speculation tax will help make the lower end of the market more affordable, particularly for condos.
The levy will be introduced this fall, targeting foreign and domestic homeowners who do not pay income tax in B.C., including those who leave homes vacant.
In the 2018 tax year, the rate will be $5 per $1,000 of a property鈥檚 assessed value. Next year, the rate will rise to $20 per $1,000 of assessed value. It will initially apply to Metro Vancouver, the Fraser Valley, the Victoria area, the Nanaimo Regional District, 琉璃神社 and West 琉璃神社.
A non-refundable income tax credit will also be introduced to offset the new levy, providing relief for people who do not qualify for an exemption but who pay income taxes in B.C.
The tax makes a lot of economic sense, Davidoff said, because B.C. has high income and sales taxes but low property taxes, which encourages vacationers to buy property and makes life more expensive for workers.
鈥淭hat is the worst possible idea in a market like Vancouver where you have a tremendous amenity level and it鈥檚 so hard to build,鈥� he said. 鈥淲e鈥檙e such a draw for people who don鈥檛 want to work here, but do want a lovely vacation home.鈥�
People who are affected by the new levy might sell their properties, freeing up housing for locals, he said.
One issue the budget didn鈥檛 directly address is zoning, Davidoff said, adding that the taxes on speculation and foreign buyers might provide some indirect help because they will 鈥渂ash鈥� the high end of the real estate market. That encourages people to push for changes in zoning density to keep their property values up, he explained.
鈥淭he property they own is going to be worth a lot less than it was before this tax. When you have new zoning, there鈥檚 a trade off 鈥� your property becomes more valuable because you can put greater density on it, but you don鈥檛 like what鈥檚 happening to your neighbourhood,鈥� Davidoff said.
He said the changes make it more attractive for people to subdivide a single luxury property into five or six moderately priced properties.
- With files from Gemma Karstens-Smith in Vancouver.
Dirk Meissner, The Canadian Press
