British Columbia has proposed a bill that would impose a 20% resale tax on people who sell their homes within a year of owning them.
Finance Minister Kathleen Conroy told Parliament that the tax was targeted at speculators who only use homes to make short-term profits and would “make profiteers think twice about inflating house prices during this housing crisis”.
The tax rate starts at 20% of the income derived from property sold within 365 days, drops to zero on the 730th day, and no tax applies thereafter.
Conroy told reporters Wednesday that her office estimates the tax would apply to about 4,000 home sales per year.
WATCH | Home resale tax aims to curb speculation, ministers say.
British Columbia announces 20% home resale tax in budget
British Columbia's budget, projecting a record $7.9 billion deficit, has announced a 20 per cent tax on homes sold within a year of 2025. The government says the measure is meant to address the rising cost of living and boost homebuilding in the province, but critics call the spending reckless.
“Wealthy investors are using homes as short-term investments to make quick profits, but people looking for homes can't get into the market,” she said.
“Buying a home is one of life's biggest decisions and milestones. Whether it's a first apartment or a new home for a growing family, we believe families shouldn't have to compete with speculators when making such an important decision.”
The tax was introduced in this year's budget and is expected to raise $43 million in its first fiscal year, with the province promising the funds will be used directly to build affordable housing.
Heidi Marshall of the British Columbia Condominium Homeowners Association said at a press conference that speculators often create an unstable environment for condominium associations.
“Simply put, speculators are often interested in profits and not necessarily in the condominium association's best interests,” she said.
“As a result, they often vote against needed repairs and maintenance or increases to condominium fees. This legislative change will support sustainable condominium communities in B.C.'s.”
Conroy said her office estimates the tax would apply to about 4,000 home sales a year.(Ben Nelms/CBC)
The government says there will be exemptions for life events such as separation, divorce and death. The tax is due to come into effect on January 1, 2025.
Conroy said the restrictions also don't apply to sellers who contribute to the housing market by building basements or other features.
The state tax is on top of a federal tax on resales that began in 2023.
British Columbia Housing Minister Ravi Kalon said about seven per cent of home sales in the province over the past two years were speculative in nature and that the federal tax was “not enough.”
Housing Minister Ravi Kallon said B.C.'s home resale tax builds on a federal tax introduced last year. (Chad Hipolito/The Canadian Press)
Experts say the tax will have no short-term impact
The British Columbia Real Estate Association says the tax will reduce home sales in the province by 1.7 per cent and have a minimal impact on home prices, potentially discouraging people from putting their homes on the market.
Brian Yu, chief economist at Central 1 Credit Union, said the tax is unlikely to have a significant impact on the housing market, at least in the current cycle.
“We think about the fact that in the current environment, the market is not as strong,” Yu told CBC News. “The price itself has actually remained pretty unchanged. [over] For the past few years.”
Yu said the tax could be most beneficial if interest rates fall, limiting the momentum of price increases.
The economist also said one concern about the resale tax is that uncertainty could limit pre-sales of homes, restricting further housing supply.
Conroy said the tax is one tool used to make housing more affordable.
“We think this is a win-win for everybody. Housing gets built. And if it doesn't get built, if people pay the tax, that money goes directly to building more housing. So it's all about building more housing,” she said.