The BC NDP government publicised plans in February’s budget to introduce the Speculation Tax, and this has been met with opposition and uncertainty amongst vacation homeowners in the BC area. In an attempt to reign in the runaway prices of housing for locals, vacation homes in certain areas that are uninhabited for less than six months of every year will be taxed. With changes due to be introduced this fall, the government assures that 99% of the BC population won’t be impacted by this new tax, even if they own a vacation home. Here is a breakdown of who the tax affects and what lies in store for them.
What is the Speculation Tax?
This new tax is specifically aimed at making housing more affordable for locals. As a response to the soaring cost of both renting and buying properties, the government hopes it will turn vacant properties back into primary houses, and tax predominantly foreign and domestic speculators.
As it stands, all properties affected by the tax will pay a rate of 0.5% in 2018. In 2019, this will remain the same for properties owned by BC residents, but will rise to 1% for out of province residents, and 2% for non-Canadians.
Who will it impact?
The tax is targeted at properties that do not qualify as long-term rentals. This means any homes that are rented for less than six months of the year, in increments of 30+ days. However, the new tax is restricted to tightly defined regions, and will only affect properties in the large urban centres of Metro Vancouver, Capital Regional District (excluding the Gulf Island and Juan de Fuca), Kelowna and West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission.
Who won’t it impact?
This is where it gets slightly complicated, as the government claim it will only affect 1% of the population. People who own one home and live in it, and those who rent a property, are automatically exempt. This also goes for those who own a property outside of the designated areas, or who own a home in these areas but it is valued at less than $400,000. There are additionally exemptions for certain owners, such as those who are undergoing medical care, long-term care, or are temporarily exempt for work purposes.
What does it means for local real estate?
Though it’s highly unlikely homeowners will be inclined to sell their properties, there are fears that this new tax could impact property shopping in the area. BC’s tourism and real-estate industries have worked hard to market the province as an exciting place to visit and retire, and there are worries the new tax could damage this long-held reputation. However, the tax is only expected to affect 15,000 homes, and proponents of the change believe it will help to tackle the housing crisis, as the number of rental units is likely to increase.
If you have any more questions regarding the Speculation Tax and the impact it will have on you, make sure to contact your local real estate professional, Lance Lundy, for more information.