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Vancouver real estate prices may increase with new taxes - especially Condos for sale in North Vancouver

Written by Posted On Wednesday, 06 June 2018 00:18

Vancouver real estate prices may increase with new taxes.


Most people have been waiting for the real estate bubble in Vancouver to burst but the industry has proven to be resilient. For the last 10 years, the Vancouver real estate industry has been on the rise resulting in price surges as well as development of properties meant for the elite. However the resilience of the real estate industry and stabilization in prices might have been influenced by external factors. One of these factors is taxation and the newly introduced taxes by the B.C.’s government might have an impact on the growing industry in Vancouver. The new tax regime has attracted mixed reactions from industrial players with some experts arguing that it might have an effect on real estate prices while remains optimistic despite the changes. These taxes certainly will affect any expats or potential international retirees looking to settle in Vancouver. Before exploring the effects of new taxes on real estate prices, let us first look at the tax changes. Keep in mind this will include all areas of Vancouver and types, from North Vancouver condos to West Vancouver Luxury real estate as well.

 

 

New real estate tax regulations from North Vancouver to East Vancouver and more

 

Earlier this year, B.C. NDP introduced an ambitious plan aimed at tackling the province housing problems in its budget. The 30 point plan introduced speculation tax, a tax increase on real estate foreign buyers and the regulation to introduce a registry which records the purchase of all the pre-sale properties. The provincial government introduced the new tax regulation hoping that it will help in stabilizing the prices of properties in the region as well as ensuring that housing is affordable for ordinary residents. This will also affect lower entry markets especially condos for sale in north vancouver.

 

Speculation tax on Vancouver homes

 

Speculation tax has attracted a lot of concerns especially form foreign homeowners who do not pay their taxes in B.C. The tax will be implemented in fall, with the target audience being foreign and domestic homeowners who do not remit their taxes to B.C. government. The property tax will be charged at 5% for every $1,000 assessed value for the first year and 20% for $1,000 assessed value for the next year. To affect this tax, the government through the finance ministry has come up with a digital tax form which homeowners are supposed to fill. The details to be provided in the tax form include SIN Number, global income statement, tax exemption information as well as Household information. The information in the tax form will be validated by the Canadian revenue authority. According to Professor Joshua Gordon of Simon Fraser University, the speculation tax will help the crux dynamics in Vancouver where wealthy foreigners buy properties in Vancouver and continue to enjoy the amenities meant for the Canadian citizens without paying their share of residential tax. In the past, concerns have been raised over inclusivity of when it comes to some of these regulations. For example, the 15% property transfer tax does not affect people on QIIP. The aim of this regulation is to connect the local housing market to the local labour market. This means that more people from the localities will be encouraged to acquire houses because the acquisition cost will be lower.

 

Impact of speculation tax on real estate prices

 

According to Vancouver realtor Richard Morrison, the speculation tax might affect the prices of real estate products in two ways. To start with, by encouraging more locals to purchase properties in Vancouver will increase the demand for real estate product and an increase in demand will result in an increase in the price of the product. However, this is only possible if the local population have the resources or access to loans from financial institutions to purchase this product. If the intake of real estate product by the local population won’t go up, then there will be a problem. The speculation tax seek to discourage foreigners from buying properties in Vancouver. However, from the statistics, real estate purchases from foreigners account for more than 9% of the properties purchased in the province. If this gap is not filled by the locals, there will be an oversupply of properties resulting in price crunch. This is a more probable outcome since most foreigners will look to buy more sustainable homes in other places, like Seattle.

 

Foreign Buyers’ tax affecting expats

 

Apart from the speculation tax, the changes also raised the tax for foreign buyers from 15% to 20%. These moves seek to make it even more costly for foreigners to acquire properties in some high-end areas in Capital Regional Districts, Nanaimo as well as Fraser Valley. Over the past, the real estate analysts have argued that the tax has zero impact on the affordability of houses in the province since its introduction in 2016. According to statistics from the national bureau, the reduction in the properties prices has been insignificant in the last two years. It can be said that that imposing taxes on foreign buyers only gives value to locals for the tax they pay but has no significant impact on real estate pricing.

 

 

However, comparing the taxation in B.C. province with other areas, the tax rate in B.A are still low but the increase might see foreigners opting to buy properties in other locations. This will definitely have an impact on the demand because investors can see other cheaper options. In addition, the fact the 15% tax instruction for foreigners in those areas did not have an effect in reduction of prices does not mean that it did not have an impact on the real estate market in Vancouver. Maybe in the absence of the tax, the prices for properties would have skyrocketed to some unimaginable figures by now.

 

Pre-sales registry

 

The 2018 B.C. budget also introduced a registry to record all contract assignments in the upcoming pre-sale market. This move was informed by Statistics Canada report which exposed that the numbers did not account for pre-sales where developers sell condo unit before construction is complete. The pre-sales process has the ability to inflate prices and provide a loophole for some merchant to evade tax. The new regulation requires contractors to disclose all information related to pre-sales to enable owners to pay all the taxes without evading. Most importantly, the information will be made available to journalist and other stakeholders. The presale registry might have positive effects on the cost of real estate in the country. With the total cost of real estate project being put open to the public, the prices, especially for pre-sold properties, will definitely come down. However most people are of the opinion that Vancouver real estate prices may increase with new taxes. My name is Richard Morrison and I am a Vancouver realtor and you can contact me anytime.

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Richard Morrison

Hello, my name is Richard Morrison and I am a real estate professional with over 15 years of
experience in Vancouver Canada and have solid real estate knowledge worldwide. I have
bought and sold in Canada, USA, Europe and South America. I also love to
study and keep informed of world economic and geo-political events, and
also love to travel, which is an added bonus

I also have co-authored the book "Real Estate Action 2.0" with Ozzie Jurock, Canada's real estate mogul: 
https://www.amazon.ca/Estate-Action-Buying-Understanding-Challenge-ebook/dp/B01LW6DFKK
My chapter is titled "Investment is Sacrifice." You can search the description on Amazon.

I've been brainstorming some topics that I think you
would get a ton of value. I also have more educational and informative topics in my mind. Hopefully you get great value from my contribution.


Thank you for your time.

Richard Morrison

https://www.strawhomes.com
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