Policy observers are divided on the value of British Columbia's upcoming provincial property resale tax, which targets people looking to make a quick buck in the real estate market.
Brendon Ogmundson, chief economist at the British Columbia Real Estate Association, said the tax would only apply to a small number of properties, which could reduce the total number of homes on the market.
Ogmundsson also said the new law may not generate the overall revenue the government expects, in part because it discourages people from putting their homes on the market and risks eliminating property transfer taxes.
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“I think the cost of this policy and the unintended consequences it has on the supply side are more trouble than it's worth in terms of the impact on home affordability, which is going to be 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 affect a small number of properties, it sends an important message that the province is “recalibrating” itself along the principle of housing first, investment second.
“We still need to look at the current situation and look at how much wealth has already been accumulated. Simply imposing a tax is not going to solve that problem,” he said.
Starting January 1, 2025, British Columbia will tax any home purchased within the first year at a 20% tax rate, tapering to zero after two years.
Ogmundson said about 10 per cent of real estate transactions in Metro Vancouver take place within two years of purchase, and many of those fall under a long list of exemptions, including divorce and relocation.
He said potential sellers who are not eligible for the exemption but are nearing the end of a two-year grace period may be tempted to wait it out.
Real Estate Association economists question whether BC's property flipping tax is worth the hassle. #BCPoli #FlippingTax #RealEstate
“The way this policy is written, the way it blocks potential listings, it's very possible that prices will end up higher than they should be,” he said.
Kershaw said there's a widespread belief that British Columbia's housing situation isn't just due to supply issues and that home prices will continue to rise.
While Kershaw said Premier David Eby had “better housing policy than any previous premier”, he said it was not accurate for him to blame all of the state's housing problems on investor misconduct.
“What we have to say is the hard truth: We've created a lot of housing insecurity in this state over the years, but we've also created a lot of housing wealth,” he said.
“And maybe asking people like me who have benefited from rising house prices to now be a bigger part of the solution could benefit both sides.”
The budget estimates the tax would raise $43 million in revenue in the first fiscal year, but the British Columbia Real Estate Association predicts the province could lose $20 million in property transfer taxes as people put off selling.
Ogmundson said there could also be additional costs associated with administering the various exemptions.
Speaking at a press conference on Monday, Eby said the home resale tax announced in last week's budget was “not a silver bullet” and was just one in a series of measures the government was taking around housing.
He said he would welcome anything the government could do to reduce the number of people competing in the housing market.
“This won't work for everyone, but it will work for some and it will limit speculators and investors from competing with families for housing,” he said.
“We want to get zero revenue from this tax. We just don't want people to be flipping homes this way.”
The Chancellor announced the idea of a resale tax last year and Finance Minister Cathleen Conroy set out details of the commitment in her Budget speech last week.
This report by The Canadian Press was first published Feb. 26, 2024.