Mayor Gregor Robertson proposes speculation tax for Vancouver real estate
Vancouver Mayor Gregor Robertson is calling for a new tax on real estate speculators to cool the city’s white-hot real estate market.
Debate has been raging over the impact of foreign investment on Metro Vancouver house prices. Robertson says speculators are to blame, forcing young people and the middle class out of the city. He says he’s asked Premier Christy Clark to impose a speculation tax to increase affordability.
“We definitely need taxation tools that discourage speculation on real estate,” said Robertson in a statement. “It’s clear that rampant speculation on real estate is driving up prices in Vancouver. Vancouver needs the B.C. government to take action on creating a speculation tax and recognize that we need a fair and level playing field to make housing more affordable for residents in Vancouver, and throughout the province.”
Prominent developer Bob Rennie of Rennie Marketing Systems was the first to propose the idea at Friday’s Urban Development Institute’s luncheon.
“So if you buy in a presale today…you pay your deposit today and you complete in two-and-a-half to three years, there’s often a higher value at completion and at completion if you sell within three months, six months, nine months, 12 months. Perhaps we should tax that profit because it’s interfered with affordability,” he explains to Global News.
However, Tsur Sommerville of UBC’s Centre for Urban Economics and Real Estate says flipping condos may not be what’s driving up the Vancouver real estate market.
“I don’t see what the evidence is that all of the sudden we’re in a raft of quick flips on housing. So taxing something that’s probably not the problem — quick sales and turnarounds — seems to me kind of silly in terms of trying to address the affordability problem,” he tells Global News. “What we’re seeing is really large price increases in the single family product, but that’s the product where there’s not more supply, there’s less supply of that.”
The province has not ruled out the idea of a speculation tax, but says changes must be weighed carefully and not destroy the equity owners have in their homes.
“By trying to move foreign buyers out of the market, housing prices overall will drop,” said Clark in the legislature earlier this month. “That’s good for first-time home buyers but not for anybody who is depending on the equity in their home to maybe get a loan or use that to finance some other projects.”
The Ministry of Finance issued the following statement to Global News with respect to a proposed speculation tax.
The Province recognizes that home ownership in British Columbia can be challenging for some people.
- Governments need to be careful that any tax would have the desired effect, without undermining the equity that people may have built up in their homes.
- Programs designed to relieve some of these challenges are targeted toward those who need it most, while ensuring that municipalities continue to receive the full benefit of assessed property tax.
- If you purchase a home for the first time, the First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax BC residents pay when they purchase their first homes. The threshold for the first-time home buyers program was increased to $475,000 from $425,000 in last year’s budget. This exemption can save first-time buyers up to $7,500 when purchasing their first home. A partial exemption continues and now applies to homes valued between $475,000 and $500,000.
- In preparation of each year’s provincial budget, the Minister of Finance reviews all taxes and considers whether changes are appropriate within the context of a balanced budget and other spending priorities.
Robertson says Ottawa also needs to step in.
“Limiting speculation is an important action for the B.C. government but we absolutely need the federal government involved in affordable housing,” said Robertson. “Their complete absence in supporting low- and middle-income housing is making it extremely difficult for people, especially young people, to live and work in Vancouver.”
–With files from Jill Bennett.