The centerpiece of the new provincial budget in British Columbia is a 30-point plan (yes, 30) to resolve the affordability problem in the province. Vancouver and the lower mainland continue to post the highest real estate prices in the country despite years of efforts to rein them in.
The key features of the 30-point plan include a new, so-called, speculation tax. It will be levied on empty homes owned by people who do not pay income tax in the province. It will be applied in Metro Vancouver, the Fraser Valley, Kelowna, Victoria and Nanaimo. The foreign buyer tax that was put in place in 2016 will be increased from 15% to 20%. It will be expanded to apply in the same regions as the speculation tax.
The B.C. government is not saying whether the taxes will be levied on vacation properties owned by people from out of province. But the inclusion of the region around Kelowna would indicate it hopes to capture some Alberta-based owners.
B.C. says it does not know if the plan will actually make housing more affordable, but it does expect to collect $1.3 billion in new revenue over the next three years. Given that the plan does nothing to mitigate the underlying economics of the affordability problem – good employment, wage growth and low interest rates – it begins to look like a government that has become dependent on real estate fees is buttressing its coffers for the inevitable market decline that will come as interests continue to rise.
Market watchers can look forward to similar moves in Ontario, which is already following B.C.’s lead. And given comments from the new mayor of Montreal, Quebec could go for it too.