Critics doubt value of real estate speculation tax

Finance minister says B.C. will be cautious of consequences as it mulls options to restrain soaring home prices

Condo towers in Vancouver's expensive Coal Harbour neighbourhood, where some critics say many units are unoccupied due to a high rate of non-resident ownership.

A speculation tax on homes bought and quickly flipped would do little if anything to restrain Metro Vancouver’s rising real estate prices, according to some observers.

Tsur Somerville, director of UBC’s Centre for Urban Economics and Real Estate, said he sees little sign of the kind of short-term speculation that has sometimes been rampant in the region.

He said most properties are being held for considerably longer than in 2006, when condo buyers lined up for hours to get pre-sale assignments that might then change hands  two or three times before the building was finished.

A speculation tax was proposed last week by Vancouver Mayor Gregor Robertson and condo marketer Bob Rennie.

“It’s a weapon aimed at a problem that doesn’t seem to be in evidence,” Somervillle said.

He and others note a speculation tax on short-term flippers would do nothing to slow the buying of Vancouver-area homes by foreigners as a long-term safe haven investment.

“A foreign investor isn’t necessarily a speculator,” Somerville said. “If that’s what we’re concerned about, this is not the tool to get at them.”

He disputes that foreign cash is driving the market, apart from in select neighbourhoods.

But real estate consultant and developer Michael Geller said he has “no doubt” foreign money is driving prices up, particularly that of detached houses.

“Something definitely is not working at the moment,” Geller said.

But he predicts a speculation tax would be ineffective and governments should instead start by cracking down on investors who dodge capital gains tax by falsely claiming an investment home is their primary residence.

Geller said other tax options include reforming either the home owner grant to give resident owners a larger credit against property taxes, or adjusting the Property Transfer Tax to charge more when expensive homes change hands.

“Maybe it should be a more finely tuned graduated scale there so if you’re buying a $5-million house it’s a larger percentage than if you’re buying an $800,000 house.”

Finance Minister Mike de Jong told reporters the province will consider various options to address home affordability, but stressed the government will proceed cautiously.

He cautioned that a five per cent drop in Vancouver property values could mean a loss of equity for families of $60,000 to $80,000.

“You’ve got to be careful about having the state intervene to regulate pricing or depress pricing,” de Jong said, adding a reduction “will have consequences for a lot of families.”

Other countries’ use of taxes to try to restrain home prices have largely failed to do much other than generate more government revenue, he added.

NDP housing critic David Eby called on the province to begin to measure foreign ownership of B.C. real estate, adding he believes it’s a major problem.

“What we need is evidence about speculation, not speculation about speculation, which can quickly lead to prejudice,” Eby said.

“My concern is absentee investors – short term or long term – who don’t contribute to the community and just drive up values for their own profit. That is the core issue.”

Eby said other mechanisms that could be considered include rebating a portion of property tax through a B.C. income tax credit, or imposing special taxes on owners of more than one property.

Surrey Coun. Judy Villeneuve, who sits on Metro Vancouver’s housing committee, said fostering more rental housing should be the priority, adding the federal government could easily restore tax credits to foster purpose-built rental buildings.

Geller noted condos have not actually risen very quickly in value in the Lower Mainland compared to the “astounding” rise of detached houses.

According to real estate board statistics as of April, detached house benchmark prices are up 97 per cent in Greater Vancouver over the past 10 years, compared to a 55 per cent increase for condos over the same period.

Real estate prices and affordability challenges ease considerably away from Vancouver, where reports predict a detached house will be increasingly out of reach for typical workers.

“The only place in North America that has fewer people living in single family houses than we do is New York City,” Somerville said, predicting that trend won’t change.

“Young families are going to be living in condos and townhouses unless they want to be living in Langley.”

The cheapest market within Metro Vancouver is actually Maple Ridge. The typical detached house there sold for $488,000 in April – less than one fifth of the $2.5 million benchmark price on the west side of Vancouver.

Just Posted

Cupcakes against cancer: Langley parents rally to help family

Christine Tulloch, a crusader against cancer, has suffered a third relapse

Aldergrove chef sentenced to seven years for million-dollar drug operation

Raymon Ranu has been working as a cook since he was arrested for selling fentanyl and cocaine

Anti-gang forum aimed at helping Langley parents keep teens safe

Preventing gang recruitment is the focus of a forum to be held next week

Langley Blaze display depth despite temporary loss of pitchers

Injury and invitation to play for Team Canada leave team down three

Killer of Calgary mother, daughter gets no parole for 50 years

A jury found Edward Downey guilty last year in the deaths of Sara Baillie, 34, and five-year-old Taliyah Marsman

Raptors beat Bucks 120-102 to even series at 2-2

Lowry pours in 25 as Toronto moves within two games of NBA Finals

Body of missing snowmobiler recovered from Great Slave Lake

Police confirm the body is that of one of three missing snowmobilers

Toddler seriously injured after falling from Okanagan balcony

RCMP are investigating after a two-year-old boy fell from the balcony of an apartment in Kelowna

Cost jumps 35% for Trans-Canada Highway widening in B.C.

Revelstoke-area stretch first awarded under new union deal

Is vegan food a human right? Ontario firefighter battling B.C. blaze argues it is

Adam Knauff says he had to go hungry some days because there was no vegan food

Winds helping in battle against fire threatening northern Alberta town

Nearly 5,000 people have cleared out of High Level and nearby First Nation

Man pleads guilty in Surrey crash that killed two Abbotsford women

Sarah Dhillon and Paige Nagata died following head-on collision on Nov. 4, 2018

Most Read