Could help be on the way for buyers in British Columbia’s too-hot-to-handle housing market? The province recently tabled a budget with some big incentives aimed at helping buyers break into real estate. To aid with the housing affordability crisis in the province, the budget promises tax breaks on new homes and collecting data on foreign buyers. This is all part of the provincial Liberal’s plan to spend $47.5 billion in the 2016/17 budget.
If you’re a buyer of a new condo, home or townhouses in B.C. with a purchase price under $750,000, you’ll save up to $13,000 on your property tax bill. To qualify you have to be a Canadian resident and live in your home for over a year (sorry, if you’re a home flipper, you’re out of luck).
Will This Really Help Home Buyers?
If you’re hoping to be able to afford a home in Vancouver’s expensive Lower Mainland though, you’ll be sadly disappointed. While the budget should help with the supply of new homes and lend a helping hand to first-time home buyers, it won’t cool the market enough to make prices affordable in B.C.’s priciest markets. Recently, a house in Vancouver sold for a crazy $735,000 over asking price at a cool $4.23 million – a new record in a market that shows no sign of slowing down.
Keeping Property Values Intact
The Liberals are playing a balancing act of trying to make the housing market more affordable, while maintaining property values for local homeowners.
“If by cool you mean actually reduce the value of people’s major asset, their home, clearly we were not interested in taking that step,” said Finance Minister Mike de Jong.
While buyers of new homes will catch a break on their property tax bill, it will be more costly for others. Homebuyers of luxury homes priced at over $2 million will face a one to three percent tax hike on their property transfer tax. Furthermore, when buying a home, buyers will have to disclose their citizenship; this will help the government keep tabs on foreign buyers.
Criticism From the Opposition
While the budget sounds good on paper, the government is being accused of taking half-measures. Critics say the budget doesn’t do enough to help with new construction, slowing price appreciation or getting more homebuyers into the real estate market.
Opposition NDP leader John Horgan is calling the measures “cosmetic changes around the edges.” The budget falls short of delivering the proposed B.C. Housing Affordability Fund, which would levy a 1.5-per-cent surcharge on foreign homebuyers.
Academics are delivering a similar message. It’s a small measure that falls short of taxing foreign homebuyers.
“It’s an attempt to try to be seen to be doing something; but lets face it, it’s not going to change affordability in Metro Vancouver very much at all,” said Jim Brander, a professor at the University of B.C.’s Sauder School of Business.
“It is possible to do things — there are big steps that could be taken, ” said Brander. “That would have a big impact, but that’s a huge step that Christy Clark has said, of course, she doesn’t want to take. Relative to the cost of housing, what’s that going to do? Not much.”
There’s no guarantee the new luxury tax rate will be paid by homebuyers – at least not directly. Developers buying land for new homes could pay those charges and pass them on to buyers in the form of higher purchase prices.
The bottom line is while the moves to address B.C. housing affordability crisis fall short in the eyes of many, at least it’s a step in the right direction. Meanwhile, homeowners in B.C. can be at ease, knowing their property values aren’t going to plummet overnight with something as drastic as a tax on foreign investors.