The goal of B.C.’s new housing measures is to lower the cost of housing, Finance Minister Carole James said Wednesday.
Speaking a day after the provincial budget, James said the reason the province is bringing in a new speculation tax, increasing the foreign buyers tax from 15 to 20 per cent and cracking down on loopholes used to make money in the housing market, is to force down prices.
“I hope to see a moderation in the market. We have to make sure that people can live in the community they work in, in the communities their children go to school in,” she said.
“I hope you will see more affordable housing.”
The stated goal will no doubt be concerning to those who have bought their homes recently and are worried that they could be stuck with mortgages worth more than their properties.
But James said a price drop only hurts people are looking to move on from their homes quickly or were hoping to use housing as a big financial windfall.
“In fact, most people that own homes right now know that they have to look in the same price if they are to buy another home, that’s a pressure for them,” James said.
“That if you’re looking at a housing market, you want to see moderation, not the same kind of escalation you see now.”
Along with new taxation measures, the B.C. government announced $6 billion to build new housing over the next ten years.
That will provide much needed supply in many markets, said Cameron Muir, chief economist at the B.C. Real Estate Association (BCREA).
But he added that, even with new measures, demand for housing is so high in many regions of the province right now that values will take time to adjust.
“In terms of market impacts, it may be great to raise tax revenue, but this is not going to have a demonstrable impact on housing markets,” Muir said.
“The chief culprit of rising home prices is the inability to supply the housing market in a timely fashion.”
There are also questions about who the new speculation tax will target.
James told reporters on Wednesday that people won’t pay the tax if someone pays income tax in British Columbia.
That means that British Columbians who declare income in the province, and who own numerous homes but leave them empty, will not have to pay the tax.
“If you are from outside the province and you leave your home vacant you will be taxed. If you want to ensure you don’t get taxed you put your house on the rental market,” said James.
James acknowledged, however, that the legislation hasn’t been drafted yet.
As for Albertans or other Canadians who own homes in Kelowna, Metro Vancouver, the Capital Regional District or Nanaimo, where the tax will apply, they would have to pay the speculation tax for their vacation homes if they sit empty for most of the year.
- With files from The Canadian Press