There has been a lot of back and forth on the new Speculation tax in BC. Aiming to combat high vacancy rates and wealth migration, the tax is one of many steps the
government is taking to address Vancouver’s housing crisis. The tax is designed for homeowners who do not live in their homes or do not rent them out and is therefore estimated to affect only 1% of BC residents with many locals exempt from the tax. It is important to clarify that this is not a target towards immigrants nor is it an effort to stall foreign investment, it is however an action towards preventing Vancouver, a major city with a huge role in the Canadian economy, from being treated like a resort town in which wealth migration is typical. Wealth migrants are those who own property in BC but earn their income elsewhere, whereas immigrants are those who move here and earn their income here. The tax is also not meant to punish BC resident’s who invest in real estate or own second properties/vacation homes. Finance Minister Carol James stated that “the tax is expected to bring in about $201 million each year, of which $140 million is projected to come from overseas or out-of-province owners, and approximately $60 million from British Columbians, who pay the lowest 0.5 per cent rate”.
So what exactly is speculation?
Speculation – “investment in stocks, property, or other ventures in the hope of gain but with the risk of loss”
The Speculation tax is therefore a tax on real estate investments which are not being utilized for the benefit of the local economy. Vancouver downtown is a vibrant and bustling core, however with so many unable to afford the cost of living in downtown, it risks losing its’s life. This tax, more aptly named vacancy tax, is aiming to encourage rentals, local investments and occupied residences. Critics question whether it will have any effect on the housing crisis and raise concerns that it may curb long term housing development.
What is the tax Rate?
For 2018, the tax will be levied at:
- 0.5% of the property’s assessed value for all properties subject to the tax
For 2019 and subsequent years, the tax will be levied at:
- 2% for foreign owners and satellite families
- 0.5% for British Columbians and other Canadian* citizens or permanent residents who are not members of a satellite family
There are many exemptions to the tax geared towards ensuring Canadian values are upheld. Some of these include;
-Owners who rent at least 6 months of the year (Starting 2019)
-Medical absence up to two years
-Care Facility residence due to old age/addiction/mental health etc.
-Spousal Separation for work or medical reasons
-Inability to inhabit due to damage or hazardous conditions
-Year of acquisition of home (see conditions)
-Land under development
* a tax credit will also be made available for B.C. residents with second homes valued under $400,000
You can view the full list of exemptions here
Looking to invest and worried about the effects of speculation tax on your returns? Call your Top Realtor Leo Wilk to discuss your options.
Check out our other blog post for more info on speculation tax here!