Too Much Too Late? – The NDP’s Affordablity PlanSynergy Mortgage
In the NDP budget speech on February 20, 2018, Finance Minister Carole James highlighted some of the government’s 30-point plan for making, buying and renting more affordable for British Columbians. The comprehensive strategy focuses on measures to discourage speculation, decrease demand from foreign buyers, and increase the supply of available housing.
Many are wondering if this is too much too late! Some of the new changes are as follows:
INCREASE PROPERTY TRANSFER TAX – one time tax at time of title transfer
- NEW: Property Transfer Tax Calculation: (effective since February 21, 2018)
1% on the first $200k
2% between $200k and $2 million
3% between $2 million and $3 million
5% on $3 million and above
INCREASE FOREIGN BUYERS TAX – one time tax at time of title transfer
NEW: Increased from 15% to 20% of fair market value: (effective February 20, 2018)
Increased to 20%, effective immediately
Previously Metro Vancouver, but expanded to Fraser Valley, Greater Victoria, Nanaimo & Central Okanagan
ADDITIONAL SCHOOL TAX – on going annual tax
NEW: Additional School Tax: (effective 2019)
- An additional school tax will be applied to properties including detached homes, strata condominiums + townhome units and most vacant land with an assessed value above $3 million.
0.2% on assessed value between $3 million and $4 million
0.4% on assessed value over $4 millionNEW SPECULATION TAX – on going annual tax
NEW SPECULATION TAX – on going annual tax (effective for the 2018 tax year)
This tax applies to residential real estate and is targeted at foreign and domestic homeowners who don’t pay income tax in BC and leave their property vacant.
Domestic homeowners: People who have more than one home: If one home is vacant (eg. Vancouver resident with a vacation home on Vancouver Island). There will be a non-refundable income tax credit, to help offset the tax; however, the credit will likely not cover 100% of the tax.
Out of province property owners: Albertans or other Canadians who own vacation homes in Kelowna, Nanaimo or other areas the tax is applicable.
Satellite families: These are households with high worldwide income that pay little or no income tax in BC.
The tax applies to Metro Vancouver, Fraser Valley, Capital & Nanaimo Regional Districts, and Kelowna & West Kelowna.
- The tax rate:
0.5% of assessed value in 2018
2.0% of assessed value in 2019
IN CONCLUSION: This is a small sampling of the 30 point plan. The bottom line is that taxes are going up for many homeowners, homebuyers and ultimately this may lead to higher rents at least in the short term.
For the most part these new changes have created confusion and what we call ‘policy change SHOCK’. Many buyers, sellers and investors will pause to absorb the new rules and observe the effect on the market. Who know how long this will take.
We have seen a decrease in sales volume in the detached home market but prices have remained strong so far. The condo market continues to remain hot.
The economists are standing by waiting for time to pass to determine the effect of all the changes. Many real estate professionals have commented that the market was already cooling off prior to the new changes.
As the sunshine ushers in the spring market it will be very interesting to see what will happen over the next few months and years. Will the market react the way the BC Government intends or is it too much too late?