British Columbia is predicted to have solid economic growth through 2018. Central 1 Credit Union said 2017 was a year of “stellar growth” and the positive momentum will continue in B.C. for the next 24 months, despite a slower housing market.
Federal lending restrictions, provincial government policies and stepped-up home construction will combine to keep a lid on B.C.’s housing market, but Central 1 does not foresee a price correction.
Over the past month, there has been much discussion about the provincial government’s proposed new “Speculation Tax” (for an overview, see this news release by the Provincial Government: https://news.gov.bc.ca/releases/2018FIN0009-000501). The province has said the speculation tax is meant to cool off housing markets where prices have been climbing out of reach for many buyers and where renters have a tough time finding a place to live.
With an estimated vacancy rate of 0.7% in Greater Victoria, this tax is aimed at encouraging property owners to rent their properties for at least 6 months of the year and thus avoid the tax. The head of Landlord B.C. expects some homeowners will start renting out their properties to avoid the tax however it is too early to estimate the extent of its impact.
While the objective is well-meaning, the actual tax may have far greater implications than the government has considered. Critics say the tax is casting its net too wide, catching homeowners who are not professional speculators but long-standing and valued members of the community. Sidney and the regional district of Nanaimo have asked to be excluded from the tax. The mayor of Langford is also proposing to have Langford excluded from the tax.
“It is not helping with housing affordability – in fact, it makes it worse,” said Kathy Hogan executive director of the Urban Development Institute’s capital region office.
“Very often a project’s financing is contingent on achieving success early on in the marketing phase. If there is not sufficient support early on, then this increases the likelihood that the project will not come to the market at all,” she says, noting that buyers from Alberta and other parts of Canada often buy in the capital region as part of a long-term retirement plan.
David Chard of Chard Developments is concerned about the effect on the Victoria economy if the tax drives away out-of-province Canadians who have second homes in the capital. “Those people come and are involved in the community. They shop, they go to restaurants. They add a lot of vitality to Victoria," he said.
If you have questions about the Speculation Tax and how it might impact you, feel free to call me.
The latest statistics from the Victoria Real Estate Board show a substantial drop in sales compared to March 2017. We are seeing an increase in the number of listings which should make it easier for buyers to find the home they have been searching for.