“The market is hopping right now,” said Okanagan Mainline Real Estate Board president Tanis Read, a real estate agent with Coldwell Banker.
“But who knows for how long?”
Read says there’s no doubt B.C.’s new speculation tax will have a huge economic impact.
“The tax is a startling move by a government that did no consultation,” she said. “It’s very irresponsible.”
In February’s provincial budget, the NDP government of Premier John Horgan dropped a bombshell that real estate agents, homebuilders, developers, municipal leaders and many homeowners have been grappling with since.
There were signs Wednesday the government may revise the tax to address concerns about its possible impact on B.C. vacation property owners, but much uncertainty remained.
“So much is unknown right now,” said Read.
“In many cases, we don’t know how much the tax will be, how much rebates could be and who exactly will be impacted.”
What the government has said is that, starting next year, homes that remain empty for most of the year in certain regions of the province and are owned by people who don’t earn an income in B.C. will be taxed an extra two per cent of the assessed value of the home.
“I have clients all over the place on this,” said Read.
“I’m showing homes to out-of-province and out-of-country clients who say they are going to buy anyway and rent it out as much as possible.
“I have investors who have their places rented out full time that say they are going to pull out regardless when the new tax comes into effect.
“And I have some clients that say they are going to sell their second home in Kelowna and take their vacation dollars elsewhere and maybe buy a place in the Shuswap, where the tax doesn’t apply,” Read said.
The two per cent tax means owners in the targeted areas of Kelowna, West Kelowna, the Lower Mainland, Victoria and Nanaimo would receive a tax bill of $13,000 a year on a property assessed at $650,000.
That’s in addition to the regular property taxes.
The speculation tax does not apply to other areas of the Central Okanagan such as Lake Country and Peachland.
The tax would also apply to homeowners who occasionally rent their premises out short term.
Effectively, the new tax zeroes in on out-of-province and foreign owners of homes in B.C. who don’t live in them full time or don’t rent them out full time.
The move, according to the NDP, will cool speculation and prices, increase housing affordability and increase rental inventory.
Real estate, homebuilder and developer groups say it’s not really a speculation tax but a levy on out-of-province and foreign buyers and vacation-home owners.
If the government really wants to thwart speculation, it should charge 50 per cent tax on any profit made by an owner who buys a home, leaves it empty and then sells it within a year, according to the Okanagan branch of the Urban Development Institute.
The tax, as announced, would penalize an Albertan owner, or even an owner from elsewhere in B.C., of a recreational property in Kelowna who uses the home for a few weeks of the year for holidays and then leaves it empty the rest of the time.
The NDP has tried to placate B.C. owners of second homes in B.C. by indicating a rebate would cover the extra tax hit.
However, it’s been pointed out the speculation tax on a $1-million recreational property would be $20,000 a year, and the rebate for a British Columbian with an income of $100,000 annually would only be $7,000.
Meantime, the Kelowna housing market is active, with 648 residential properties sold in February, up six per cent from the 609 sales in the same month last year.
The average selling price of a single-family home in the city last month was $678,156, also up six per cent from the $638,447 in February 2017.
“We’re busy. Almost everything on the market will be getting offers — maybe even multiple offers — and selling relatively quickly,” said Read.
“I wonder why the government is doing this to drag down the market,” she said, referring to the speculation tax.
“I hope it was a trial balloon to see what the backlash is and, now that they’ve seen the reaction, the speculation tax goes away.”
James said Wednesday that concerns about unexpected tax increases from some B.C. property owners with two properties are being heard. She said the government is preparing the final details for the speculation tax, and vacation property owners from B.C. is one of the tax issues being reviewed.