VANCOUVER — Policy watchers are split on the value of British Columbia’s upcoming provincial flipping tax targeting those looking to make a quick buck in the real estate market.
Brendon Ogmundson, chief economist of the British Columbia Real Estate Association, says the tax could end up reducing the overall number of homes on the market while only applying to a small number of properties.
Ogmundson also said the new law may not generate the kind of overall revenue the government is predicting — in part because it runs the risk of discouraging people from putting their homes on the market, resulting in lost property transfer taxes.
“I think that the cost of this policy, and the unintended consequences of it on the supply side of things, are more trouble than they’re worth in terms of the effect on affordability, which is very minimal,” he said.
Paul Kershaw, a policy professor at the University of British Columbia and founder of the think tank Generation Squeeze, said while the tax may only impact a small number of properties, it sends an important message that the province is “recalibrating” around the principle of having a home first and an investment second.
“We still need to turn our attention to the here and now, looking back at how much wealth has already been accumulated, and just putting in a flipping tax is not going to address that,” he said.
As of Jan. 1, 2025, homes in B.C. sold within the first year after being purchased will face a tax rate of 20 per cent of the profit, while that tax rate drops gradually to zero after two years.
Ogmundson said about 10 per cent of real estate transactions in Metro Vancouver take place within two years of a purchase, and many of those would qualify under a long list of exemptions including divorce or job relocation.
He said would-be sellers who don’t qualify for an exemption but are near the end of the two-year window may be tempted to wait it out.
“It’s a very real risk that because of the way this policy is written, how it discourages potential listings, that you could end up with prices higher than they would have been otherwise,” he said.
Kershaw said B.C.’s housing situation is caused by more than issues with supply and people have normalized the idea that housing prices will continue to rise.
While crediting Premier David Eby with having “better housing policy than any premier we’ve had before,” Kershaw said it’s not accurate for the premier to blame all of the province’s housing woes on abuse from investors.
“What we need to be saying is, hard truth: We’ve created a lot of housing unaffordability in this province over the last many years, but we’ve also created a lot of housing wealth,” he said.
“And is there a potential win-win there, where we can try and ask people like me, who’ve been benefiting from rising home values, to now be expected to contribute to a bigger part of the solution.”
The budget estimates the tax will generate $43 million in its first full fiscal year, but the B.C. Real Estate Association predicts the province could lose out on $20 million in property transfer taxes as people put off their sales.
Ogmundson said there will also likely be additional costs related to administering the various exemptions.
Eby told a news conference Monday that the flipping tax, announced in last week’s budget, is “not a silver bullet” and is only one of a series of actions the government is taking related to housing.
He said anything the government can do to reduce the number of people competing for housing in the market is welcome.
“It’s not going work for everybody, but it’s going to work for some people, and it’s going to restrict speculators and investors from competing with families for a place to live,” he said.
“We actually want the revenue from this tax to be zero. We just don’t want people to be flipping homes in this way.”
The premier announced the idea of a flipping tax last year and Finance Minister Katrine Conroy released details of the pledge in last week’s budget speech.
This report by The Canadian Press was first published Feb. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
