File photo: Lauren Boothby/VICTORIA NEWS

Real estate agents brace for speculation tax impact

“There’s a real potential for a domino effect to hurt the market in Kelowna.”

It’s been only a few days since the NDP government tabled a budget that targeted out-of-province homeowners with new taxes and there have already been reverberations in the local real estate market, says an industry insider.

“Yesterday (a local realtor) had an offer collapse from a couple in Germany who were looking at moving here. They’re a young couple who moved to Canada for school,” said Elton Ash, regional executive vice president, RE/MAX Western Canada, adding that it’s just one of two deals that collapsed

Related: B.C. speculation tax applies to out-of-province homeowners

The couple had the advantage of being able to work remotely as medical researchers, and decided it would be better for them to buy in Kelowna rather than Vancouver, which until this week didn’t have a foreign buyers tax. With news that the Kelowna and West Kelowna would now have the 20 per cent levy applied to foreign purchases, like Metro Vancouver and the Fraser Valley, they collapsed their offer.

“You can safely assume that they are going to immigrate to Canada to be medical researchers,” said Ash. “That’s someone with a great job and contributing to the Canadian economy in a meaningful way, but now because of government intervention they’re reassessing. These people aren’t speculators, they’re trying to live in a great country. It’s a perception that the government is giving the world about closing our doors and not wanting you to come here. It’s very negative. ”

While including the region in the foreign buyers tax is already having an effect, it’s what’s being billed as the speculation tax that may be more problematic to the local market.

In a Kelowna Chamber of Commerce budget debrief, Nicole Watson of KPMG explained that the new speculation tax is aimed at foreign and domestic property owners who are parking capital in real estate. The tax would apply to owners who do not pay income tax in British Columbia. Principal residences are exempt, as are properties with long-term renters.

The tax in 2018 will be 0.5 per cent of a property’s assessed value, a rate that rises to two per cent for 2019 and thereafter. It will be charged annually, separate from regular property taxes. B.C. predicts it will generate $200-million in revenue a year.

The levy will apply to properties in Metro Vancouver, the Fraser Valley, the Vancouver Island regions of Victoria and Nanaimo and the municipalities of Kelowna and West Kelowna. Nowhere else in the Okanagan is being affected.

Related: BC BUDGET: NDP cracks down on speculators, hidden ownership

Ash said this could be of major significance to the local market, especially when the number of condominium units in the pre-sale or early construction stage are factored in to the equation.

“There’s a lot of inventory coming on. Most has been pre-sold, but if people are buying from a recreational point of view at One Water, The Ella or Ellis Parc… these are people who want a piece of the Okanagan lifestyle and will be penalized. They may look at it thinking, ‘maybe I will lose my deposit because that would be cheaper than I will pay (with the speculator tax).’ There’s a real potential for a domino effect to hurt the market in Kelowna.”

It could be similar to what happened in Kelowna when the US housing market collapsed due to faulty loans. Perception caused investments to be pulled and the condo market caved, projects were put on hold and condo unit prices stagnated.

While there is cause for concern, Ash said he hopes that the provincial government clarifies a few points and calms fears.

“When they introduce this in the budget, it’s very grey at this point in time because they haven’t provided specific details around it and Finance Minister Carole James has suggested there could be massaging as far as recreational purchases are concerned,” said Ash. “The whole thing is ill-conceived particularly when it comes to the Interior.”

To report a typo, email:
newstips@kelownacapnews.com
.


@KelownaNewsKat
kmichaels@kelownacapnews.com

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Central Okanagan schools ready to welcome students back

Students are set to go back to school next Monday, June 1

Van runs over fire hydrant, spraying water into West Kelowna mobile home park

The incident occurred around 5:40 p.m. near Boucherie Road

North and Central Okanagan on flood watch

Kalamalka Lake users are asked to take measure to reduce the risk… Continue reading

Okanagan-shot film “The Colour Rose” wins two cinematography awards

Locations in the Okanagan were used such as; The Casorso residence, BNA, Father Pandosy, Venture Academy and Idabel Lake Resort

B.C. legislature coming back June 22 as COVID-19 emergency hits record

Pandemic restrictions now longer than 2017 wildfire emergency

Houseboat company partly owned by Shuswap MLA withdraws controversial ad

The ad welcomed houseboaters from other provinces, contradicting anti COVID-19 measures.

Squabble between campers in North Shuswap leads to bear spraying

An argument over late night partying escalated into a fight which led to one person being sprayed

B.C.’s essential grocery, hardware store employees should get pandemic pay: retail group

Only B.C.’s social, health and corrections workers are eligible for top-ups

Edmonton, Vancouver and Toronto vying to be NHL hubs, but there’s a catch

The NHL unveiled a return-to-play plan that would feature 24 teams

B.C. sees 9 new COVID-19 cases, one death as officials watch for new cases amid Phase Two

Number of confirmed active cases is at 244, with 37 people in hospital

Penticton may soon allow drinking alcohol in some public places

Trying to inconspicuously drink on the beach could become a thing of the past

VIDEO: Flowers stolen from Vernon distillery

Okanagan Spirits Craft Distillery captured surveillance footage of the thief in a black car

Fundraiser launched for North Okanagan drive-in

Vernon resident seeks to raise $20K to save Starlight Drive-In

Most Read