The B.C. government’s new real estate taxes will have a big impact on Kelowna and any funds raised should stay in the city. That’s the crux of a report presented to Kelowna city council Monday, in the wake of the provincial government’s new taxes aimed at stabilizing the housing market and creating more rental units.
It’s a 12-page report that touches on the three real estate taxes announced by the provincial government in its 2018 budget.
Starting with the foreign buyers tax where an additional 20 per cent is added to the purchase price, the impact can be significant.
Just look at the numbers: A typical condo selling for $332,000, add 20 per cent and the foreign buyer is paying more than $66,000 in additional taxes. At the other end of the scale, the sale of a $3 million waterfront home to a non-B.C. resident will see the buyer dishing out an additional $600,000.
And none of the money stays in Kelowna.
The report predicts that fewer international buyers will come to Kelowna, and the province will end up collecting upwards of $3 million in additional tax revenue.
The report goes on to say that international buyers will look to areas where they don’t have the tax such as Vernon, Penticton and Kamloops.
Regarding the increased property transfer tax — where homes valued at more than $3 million would be taxed up to 5 per cent — the report says the impact on Kelowna would be minimal because of the 54,000 properties in the city, only 400, or less than one per cent, are assessed at more than $3 million.
The bulk of the report is dedicated to the controversial speculation tax. It’s based on assessed value and designed to encourage homeowners to put their vacant properties on the rental block.
If it’s not the owner’s secondary home, some could be paying thousands of dollars more in taxes — on top of their property taxes.
There are an estimated 57,000 private dwellings in Kelowna.
Of those, a little more than 3,500 are unoccupied. The report estimates that half — about 1,700 — of those are owned by non-B.C. Residents. If half of those owners put those places on the rental market, it would add anywhere between 450 to 900 units on the rental market.
But the report says the speculation tax won’t have the desired effect because it doesn’t address the issue of property flipping.
It says that because the tax is based on annual assessment and not when the property is sold, it might encourage more flipping sooner to avoid the taxes and driving housing prices even higher.
The report says the speculation tax looks more like a ‘vacant home tax’ and fails to address the speculation in the market.
It says that the speculation tax will have a negative impact on Kelowna because potential buyers will look to buy in other communities where there is no such tax.
Finally, it says that any additional revenue generated from these taxes go into affordable housing initiatives in Kelowna.