Using a backdrop of new construction in Victoria

BC VIEWS: Real estate tax increases windfall

Finance Minister Mike de Jong found an extra half billion from property transfer tax last year, with much more to come

The lights came back on in the B.C. legislature last week to reveal the government’s sudden decision to impose a 15 per cent tax on foreign property purchases in Metro Vancouver.

This came after months of government refusal to intervene in a heated urban market in ways that might devalue properties for people whose homes represent a large chunk of their life savings.

It remains to be seen whether this large wrench applied to the problem will cool the market, or trigger declining property values as similar efforts have done in other major cities. The extent of the ripple effect on B.C. communities outside Metro Vancouver is also something that will be closely watched.

Premier Christy Clark and Finance Minister Mike de Jong announced the tax with a week’s notice, leaving realtors and developers scrambling to close deals before thousands more in property transfer tax was imposed on foreign buyers.

This dramatic intervention was based on less than five weeks of information on the nationality of buyers. Early results showed foreign buyers represented five per cent of Metro Vancouver real estate sales. Another two weeks of data showed a spike to nearly 10 per cent, and suddenly the big wrench came out.

Housing Minister Rich Coleman acknowledged that the surprise tax left the real estate industry “taken aback and a bit grumpy.” They worried foreign buyers might back out of deals after sellers have bought another home. They also fear that the tax might pop the real estate bubble, causing a rapid reversal of the long sellers’ market that has taken on a life and a psychology of its own.

One thing is certain. The province’s windfall from the property transfer tax can only grow even further as foreign buyers pay up.

The size of this windfall was shown in the government’s audited public accounts for the 2015-16 fiscal year, which de Jong released just days before announcing the new real estate tax.

The property transfer tax has been a cash cow for the province since Bill Vander Zalm introduced it in the 1980s, and by 2015-16 it had reached about $1.5 billion. For comparison purposes, that’s almost twice as much as total provincial revenue from the forest industry.

The current B.C. budget had forecast that property transfer tax revenues would decline this year and next year. The public accounts showed that for 2015-16, the government took in $468 million more than expected, meaning real estate accounted for most of the provincial surplus.

How much more is raked in by the new transfer tax on foreign buyers remains to be seen, but it will be substantial. And Coleman allows that he has been developing “a really cool plan” to use that money to improve the housing situation for lower-income people.

A couple of weeks ago I described the clamour of urban protesters demanding that governments build thousands of units of social housing. Coleman has long rejected the idea of social housing projects that create clusters of poverty, and he assured me last week that isn’t going to change.

B.C. has 20,000 low-income households getting a rent subsidy today, and Coleman suggested that will be increasing. He’ll be announcing new measures in September to stimulate construction of new rental housing.

It remains to be seen how that will work as well. But it gives the B.C. government lots more money to spend in an election year.

This is the latest of a string of Clark’s election-year fixes. I’ll look at some others in a future column.

Tom Fletcher is B.C. legislature reporter and columnist for Black Press. Email: tfletcher@blackpress.ca Twitter: @tomfletcherbc

 

Just Posted

Appreciation dinner for Keremeos firefighters in the works

Dinner and fundraiser for the Keremeos Volunteer Fire Department to be held Nov. 17 at Victory Hall

Luxury Airbnb in Kaleden has notice issued on title by RDOS

The property owner is accused of performing renovations, renting the chalet without proper permits

Drunk driver gets hammered by judge

Hedley man under virtual house arrest for three months

The Similkameen Sizzle draws crowds

Annual festival was a hot, hot, hot time

Tim Roberts, Area G candidate

Roberts has lived in the Similkameen Valley for 38 years

Your morning news in 90: Sept. 24, 2018

Tune in for 90 seconds to get the top headlines for the Okanagan, Shuswap and Similkameen.

Trudeau urges leaders to follow Nelson Mandela’s example at UN tribute

Peace summit in New York marks 100th birthday of former South African president

Senate seats filled in B.C., Saskatchewan

Canada’s newest senators are the first woman to lead the RCMP and a Cree Metis businessman

Newfoundland’s popular ‘merb’ys’ calendar is back

The calendar of burly, bearded mermen posing against scenic backdrops for charity returns

Cap rent increases at inflation rate, B.C. task force recommends

MLAs say drop annual increase that would allow 4.5% rise next year

School, church, old mining site make Heritage BC’s first ‘watch list’

The list includes sites in need of protection to maintain B.C.’s culture and history

Yowza! Twerk, emoji and facepalm are added to Scrabble dictionary, OK?

Merriam-Webster has announced 300 new words have been added to the spelling game

LGBTQ activists, allies in Victoria counter anti-SOGI protest with rally of their own

Lower Mainland activists plan to protest SOGI on legislature lawn, Sept. 29

Cities make power play for new fiscal order with eye to 2019 federal election

Trudeau ordered Champagne to talk with provinces and territories about ways to “address the timeliness of the flow of funds” to projects.

Most Read