Housing Costs in Vancouver Threaten Economy: Mayor
Gregor Robertson, Mayor of Vancouver, says recent reports and recommendations from banks, organizations, real estate boards and economists has made it clear to him that it’s time to deal with Vancouver’s sky-rocketing real estate prices or the city’s economy could suffer.
On Sunday his office released a statement in support of a house flipping tax as a measure to reduce speculation and a luxury sales tax to help, “rein in the excesses of Vancouver’s housing market.” it stated in part and went on to say that, “First and foremost, housing needs to be for homes, not just treated as a commodity”
Their proposal comes as rental-vacancy rates in Vancouver slipped below one per cent last year and the average selling price for a single-family home on the city’s west side is above $2.5 million.
Last June, the provincial government rejected calls from Robertson to levy speculation and luxury taxes on foreign owners and speculators as a way to keep prices from rising, citing reports from the British Columbia Finance Ministry that said the province would lose $1 billion in residential real estate sales and almost 4,000 construction jobs if government moved to reduce foreign investment in the housing market. The six-page analysis comes as economists, academics and real estate experts propose a tax on owners of vacant properties to generate a potential Housing Affordability Fund of up to $90 million to be shared among local owners.
Further, at the time, Premier Christy Clark said at the time that using taxes to drive down prices could hurt current homeowners by reducing their equity. B.C.’s current property-purchase tax is charged at a rate of one per cent for the first $200,000 of the sale price and two per cent for the remainder of the market value. The property-purchase tax on a property valued at $250,000 is $3,000. However, first-time B.C. home buyers are currently exempt from the property-purchase tax on homes valued up to $475,000.
At the Federal level, Canada may consider a tax on foreign investors flipping Canadian homes for a quick profit, according to CIBC Economist Benjamin Tal.
The Canada Mortgage and Housing Corporation (CMHC) is seeking new ways to track foreign money in Canada’s housing market. Unfortunately, hard data on foreign money is hard to come by, as Canada does not yet reliably track such information, but Statistics Canada was earmarked half a million dollars in the recent federal budget to beef up its data collection on the housing market. Hoever, some economists don’t perceive it as a problem.
“A satellite family situation is probably more common than perceived,” Tal says. “ That’s a case in which the money comes from outside the country, but family members — mostly wives, children or students — reside in Canada…Flipping is not the main motivation here,” - Benjamin Tal
Cameron Muir, chief economist of the British Columbia Real Estate Association, says the entire province experienced a record setting month for real estate sales in April, in part due to B.C.’s strong economy. This is leading to rises in housing prices not just in Vancouver, but in surrounding communities.
Charles Wiebe, president of the Fraser Valley Real Estate Board, says “it’s almost a perfect storm of factors. We have a very strong provincial economy and job growth, low interest rates and lots of homes in the Valley that are still very affordable. It’s all come together to create this immense, unprecedented drive to our region.”