The news has been flooded with articles regarding the 2018 BC Budget changes and people talking about how these changes will affect Real Estate for both Buyers and Sellers. We have broken these changes down to explain how they will affect the Central Vancouver Island Real Estate Market.
Property Transfer Tax
This change is increasing the Property Transfer Tax from 3% to 5% on the portion of the fair market value ABOVE $3,000,000. Central Vancouver Island is still very affordable in comparison to other areas like Victoria and Vancouver. Presently we have less than 10 properties that currently are listed above the 3 million dollar price point. As a result, this tax increase is likely to have a low impact in our area. Unfortunately, it does not appear to bring any relief for the average or lower priced properties affecting the people that need the most help.
This tax is aimed at non BC Residents who own residential property here but don’t pay BC Taxes. The Government is calling this a tax aimed at speculators who are driving up housing costs. Normally speculation, as the name suggests, would be defined as the investing in stocks, property or other ventures in the hope of gain. However, this tax will affect Canadians from other provinces who own property on the West Coast to escape the cold weather climates in the winter while still having the comfort of staying and investing within Canada. What this tax implementation doesn’t recognize is what these investors bring to our economy in the off season months. They assist in supporting our restaurants and other venues that experience slower times outside of the tourist seasons.
The good news is that there may be a way to offset this tax by renting out the property at times throughout the year that it is not being used by the homeowner, and then filing BC Tax on the rental income. Property owners affected by this tax are encouraged to talk to an accountant about their options.
Foreign Buyer Tax
The Foreign Buyer tax is likely the most talked about. This is an additional 20% property transfer tax for any Buyer who is NOT a Resident of Canada. This tax was first implemented at 15% in Vancouver in August of 2016 and in Toronto September 2017. Through interviews with industry leaders we have learned that this had an immediate short term affect in these areas that lasted a few months but then consumers adjusted, and the market settled back in again.
This tax has now been introduced to the Nanaimo and Regional District and other areas in the province. The higher priced markets will feel more of an impact from this tax as 20% is not as impactful on lower dollar amounts than on higher price points. There is not a lot of data history on the percentages of properties sold to non residents of Canada. It is believed that most Buyers are already here as residents and are just being funded out of other Countries. The other consideration is the risk factor, some Buyers believe it is better to pay the 20% tax than to risk 100% of their money leaving it where it is. Vancouver and Toronto saw a bit of a shift towards the condo market instead of Single Family homes but as our area is different we don’t expect this to be the same.
As your advisors in Real Estate we are always available to answer any questions you may have. We look forward to hearing from you.
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