The woman in charge of building a 33-storey hotel and condominium tower on the downtown Kelowna waterfront says if the province’s new speculation tax remains in place as it is now, or if “the spectre of it remains for months,” it will push back construction of the development.
“What is almost certain is that the timeline of the hotel will be affected,” said Gail Temple, vice-president of Westcorp, the Alberta-based developer building the hotel.
“Buyers will simply not move forward without more clarity and understanding of potential tax impacts, and nor would any of us if we were in their position. The reality is, project decisions will be guided and impacted by what the purchasing public decides to do.”
Temple was responding to questions arising from comments by Urban Development Institute Okanagan president president Kevin Edgecombe Tuesday, who said he was told construction of the hotel was “doubtful” if the speculation tax remains in place.
Edgecombe, who was speaking to West Kelowna council about the new tax, also said the tax, which targets out-of-province owners of B.C. homes, has prompted some buyers at another large Kelowna condominium project, One Water Street, to try to “wiggle” out of signed contracts.
But the man in charge of selling condominiums in what will be Kelowna’s two tallest residential towers said that’s not the case.
“We don’t have people trying to get out of contracts,” said Mark West, president of Epic Real Estate, the co-listing agent for One Water Street development.
But he said the announcement of the new tax by the B.C. government in its recent budget has prompted some prospective buyers to “pause” when considering a purchase. And the tax is being blamed for one potential buyer from Saskatchewan walking away from a deal.
More than 190 condos in the 225-unit, 36-storey east tower have already been sold, and prior to the announcement of the tax that level of interest had prompted the developer to push up the sale of units in the second, 29-storey west tower by six months.
Temple said the speculation tax could have a significant impact on the sale of the 40 residences at her hotel project. So while the company is proceeding with its design work and plans for the building, it is moving “very cautiously ” in regard to other large expenditures such as the sales presentation centre.
Temple, like West, said the her company wants a better understating of the impact of the tax.
“We have heard from potential buyers who have said that if the speculation tax is imposed, they will no longer be looking to purchase in Kelowna,” she said.
“At this point, we do not have an understanding of the magnitude of the problem this will pose to our project, but suffice to say, we are anxious to see the tax issue addressed as soon as possible because of the uncertainty and fear that it has introduced into our marketplace.”
Both West Kelowna and Kelowna city councils have expressed opposition to the tax and fear for the impact they feel it will have on their respective economies. The two cities are the only municipalities in the B.C. Interior subject to the tax.
Opposition has also been expressed by many in the community including business groups, the development industry, other businesses and the general public.
A report by West Kelowna city staff, presented to council following Edgecombe’s remarks Tuesday, said the tax could have a big impact on infrastructure spending there because it could curtail development. That, in turn, could reduce development cost charge revenue to the city which is used to help pay for infrastructure additions and improvements.
The report estimates the tax could be applicable to 6,700 properties in the city and add a whopping $10.3 million to the property owners tax bills.
But it is not just out-of-province owners who could be affected, said West Kelowna chief administrative officer Jim Zaffino.
He said some B.C. residents with second homes could also be affected because they may not have family incomes large enough to get the full tax credit the government says it will provide to protect B.C. residents from the new tax.
Temple said the condominiums in the Westcorp hotel tower will likely be primary or secondary residences and are unlikely to be speculative purchases. But, she said, they could easily be “caught” by the new tax.
“We are still in shock that the provincial government could have the right to tax homes to such outrageous levels, especially given that the tax will affect so many people who have owned their homes for years,” said Temple in an email response to questions about Edgecombe’s comments from the Capital News.
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