What’s the latest monthly report from our market, and how will BC’s recent tax changes affect our market moving forward in 2018?
Overall, last month’s sales across Metro Vancouver were down 14.4% below the 10-year February sales average.By property type, detached home sales were down 39.4% over the same period, while attached home sales were down 6.8%, and apartments were up 5.5%. This difference between apartments and homes could be because of the new mortgage stress testing rules affecting entry-level properties.
The active-to-sales ratio was 14% for detached homes, 37.6% for townhomes, and 59.7% for condominiums. Generally, we see downward pressure on home prices when this ratio dips below the 12% mark for a sustained period and upward pressure when it rises above 20% for several months.
Now, let’s turn our attention to the benchmark prices for detached homes. Although sales have been down, prices compared to last year have risen 8.2%, with a benchmark price of $1.6 million. Detached homes have also been selling under their assessed value for the last three months.
Condo prices have risen 27.2% compared to last year, with a benchmark price of $682,000. Attached home prices have risen 18% compared to last year, with a benchmark price of $819,000.
Those are the statistics from February, but the rest of the year could look very different. Why? The BC government announced on February 20 that there would be new taxes to limit speculation for foreign property ownership and more legislation to provide more oversight on condo presale assignments.
Let’s look first at the foreign buyers tax increase, which went from 15% to 20%. This 5% increase won’t have a big effect except in the sense that it will now cover the whole province of British Columbia and not just the Metro Vancouver area. When this tax was first introduced in Vancouver in 2016, we did see a slowdown in our market for the first few months, and I did see a lot of foreigners switch their purchasing focus from Metro Vancouver to other areas of British Columbia.
Another changed that was announced was the increase in the BC property transfer tax that would be charged to homes over $3 million. This increase went from 3% to 5%. Also, all homeowners with a tax assessment of over $3 million will have to pay an increase in public school taxes of about $6,000 per year.
The BC government also implemented a speculation tax that’s meant to target non-BC tax-paying resident homeowners. Since this rule’s been introduced, districts such a Kelowna have been complaining because approximately 18% of homeowners live and pay taxes in Alberta. I see the government’s intent of increasing the supply of BC tax-paying residents, but maybe this tax should be softened up a bit with the exemption that the owner be a tax-paying Canadian resident.
For now you can say goodbye to owning a second home, otherwise, you’ll pay an extra 2% of your tax assessment value per year for keeping it vacant. Your best solution is to sell it or put it in the rental pool.
The BC government is also taking action to close certain loopholes in our tax system. They’re forcing developers to report presale condo assignment sales and forcing land title offices to track hidden ownership. I feel like this is a good change, especially since developers would privately sell their most expensive units to speculators one floor at a time. In turn, these speculators would sell their units off privately and not report any capital gains.
With all of these changes, demand should decrease for speculators and our general housing inventory should increase.Presale homes should also be more readily available to locals in the near future. Prices across Metro Vancouver have traditionally been pretty sticky, so I don’t foresee any major change in prices, except perhaps with detached homes. For areas outside of Metro Vancouver, I’m predicting a general slowdown.
If you want to dive further in depth into these tax changes, I invite you to check out these links:
If you have any more questions about our market our any of these tax changes or you’re thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’d be happy to help you.