Premier David Eby has made it clear that speculators are the target, with his government announcing details of a new “B.C. Home Resale Tax” in the 2024 budget.
Starting January 1, all gains made on the sale of a home within two years of purchase will be taxable, subject to certain exceptions.
The legislation the government is hoping to pass in parliament in the spring would introduce a sliding scale, with a 20% tax on profits on homes sold within the first year, gradually falling to 10% if sold after 18 months and zero after two years of ownership.
The Treasury Department estimates the tax would raise about $43 million a year.
“This tax applies to income from the sale of real estate with dwelling units and real estate zoned for residential use,” the budget and financial plan states. “This tax also applies to income from the transfer of contracts to purchase such real estate.”
If you sell your primary residence within two years of purchasing it, you can exclude up to $20,000 when calculating your taxable gain.
Various reasons will be grounds for exemption from paying tax, including divorce, death, illness, job transfer, etc. The tax appeal mechanism and the documents required are still being worked out. The documents will be prepared by the tax authorities between now and January, and details will be announced after the bill is formally passed.
The revenue will be used to build new affordable housing across the state.
“The purpose of the tax is to support, not hinder, housing supply,” the budget document states.
The tax will take effect on properties sold after Jan. 1, 2025, “and will also be levied if you purchased the property before the effective date.”
B.C. budget confirms billions of dollars in housing investment, real estate outlook brightens
The provincial budget formalizes the billions of dollars the BC NDP has pledged in recent weeks to programs such as BC Build, and also provides a detailed analysis of the current state of the housing market and where the government expects it to go.
In the Vancouver, Victoria and Abbotsford regions, the number of building permits declined last year and unsold inventory of new homes increased compared with 2022.
Interest rates were blamed for sluggish sales last year in British Columbia's largest housing market, and while the population continues to grow due to international immigration, interprovincial migration to other provinces, primarily to Alberta, has declined for the fifth consecutive quarter.
Financing challenges, a shortage of skilled labor and ever-rising construction costs have impacted the market, with the number of completed, move-in ready new homes falling in the Vancouver and Kelowna areas but increasing in Victoria and Abbotsford.
Nonetheless, “the ministry expects home sales activity to recover in 2024 from a slump in 2023,” with prices expected to rise an average of 2.3% this year and 2.9% in 2025.