It has been a few weeks since the new NDP Government delivered on its promise to introduce bold actions towards BC’s bubbling housing market. Some homeowners are still reeling the NDP’s first provincial budget which came just as the federal government’s newly-tightened mortgage lending rules begin to take hold, a major change with impacts that have yet to be felt in the market.
Foreign buyer’s tax increased
To highlight a minute portion of their 30-point plan, the NDP Government announced it will be increasing the foreign buyer’s tax from 15% to 20% effective immediately. The tax will now hit the previously exempt areas of Victoria, Nanaimo, the Okanagan, and the Fraser Valley. This extension prevents speculation from expanding to other communities outside of Metro Vancouver.
New speculation tax
As another measure to tackle housing affordability, beginning in the 2018 tax year, the provincial government will enforce a new annual speculation tax on residential real estate targeted at foreign and domestic homeowners who do not pay income tax in BC. This also includes individuals who leave their homes vacant.
The tax rate begins at 0.5% of taxable assessed value for 2018 and rises to 2% starting in 2019. Households with high worldwide income that pay little income tax in BC will also be captured by the tax as well as unsuspecting Canadians, who own property in BC, but pay income taxes in other provinces.
Property-transfer tax hike
Effective immediately, there will be a hike on the property-transfer tax from 3% to 5% on properties worth more than $3 million. To put this into perspective, as of now, a foreign buyer of a $4 million home in Metro Vancouver would now be subject to $920,000 in taxes upon closing!
Home Owner Mortgage and Equity (HOME) Partnership program
And finally, the BC NDP will be winding down the BC Home Owner Mortgage and Equity (HOME) Partnership program – the BC Liberal’s year-old first-time homebuyer loan program – due to low demand. No new applications will be accepted after March 31.
While it’s too early to tell just how impactful these policies will be, the changes coincide with stricter mortgage regulations and higher rates, both of which have not fully worked their way through the system.
