Critics doubt value of real estate speculation tax

Finance minister says B.C. will be cautious of consequences as it mulls options to restrain soaring home prices

A speculation tax on homes bought and quickly flipped would do little if anything to restrain Metro Vancouver’s rising real estate prices, according to some observers.

Tsur Somerville, director of UBC’s Centre for Urban Economics and Real Estate, said he sees little sign of the kind of short-term speculation that has sometimes been rampant in the region.

He said most properties are being held for considerably longer than in 2006, when condo buyers lined up for hours to get pre-sale assignments that might then change hands  two or three times before the building was finished.

A speculation tax was proposed last week by Vancouver Mayor Gregor Robertson and condo marketer Bob Rennie.

“It’s a weapon aimed at a problem that doesn’t seem to be in evidence,” Somervillle said.

He and others note a speculation tax on short-term flippers would do nothing to slow the buying of Vancouver-area homes by foreigners as a long-term safe haven investment.

“A foreign investor isn’t necessarily a speculator,” Somerville said. “If that’s what we’re concerned about, this is not the tool to get at them.”

He disputes that foreign cash is driving the market, apart from in select neighbourhoods.

But real estate consultant and developer Michael Geller said he has “no doubt” foreign money is driving prices up, particularly that of detached houses.

“Something definitely is not working at the moment,” Geller said.

But he predicts a speculation tax would be ineffective and governments should instead start by cracking down on investors who dodge capital gains tax by falsely claiming an investment home is their primary residence.

Geller said other tax options include reforming either the home owner grant to give resident owners a larger credit against property taxes, or adjusting the Property Transfer Tax to charge more when expensive homes change hands.

“Maybe it should be a more finely tuned graduated scale there so if you’re buying a $5-million house it’s a larger percentage than if you’re buying an $800,000 house.”

Finance Minister Mike de Jong told reporters the province will consider various options to address home affordability, but stressed the government will proceed cautiously.

He cautioned that a five per cent drop in Vancouver property values could mean a loss of equity for families of $60,000 to $80,000.

“You’ve got to be careful about having the state intervene to regulate pricing or depress pricing,” de Jong said, adding a reduction “will have consequences for a lot of families.”

Other countries’ use of taxes to try to restrain home prices have largely failed to do much other than generate more government revenue, he added.

NDP housing critic David Eby called on the province to begin to measure foreign ownership of B.C. real estate, adding he believes it’s a major problem.

“What we need is evidence about speculation, not speculation about speculation, which can quickly lead to prejudice,” Eby said.

“My concern is absentee investors – short term or long term – who don’t contribute to the community and just drive up values for their own profit. That is the core issue.”

Eby said other mechanisms that could be considered include rebating a portion of property tax through a B.C. income tax credit, or imposing special taxes on owners of more than one property.

Surrey Coun. Judy Villeneuve, who sits on Metro Vancouver’s housing committee, said fostering more rental housing should be the priority, adding the federal government could easily restore tax credits to foster purpose-built rental buildings.

Geller noted condos have not actually risen very quickly in value in the Lower Mainland compared to the “astounding” rise of detached houses.

According to real estate board statistics as of April, detached house benchmark prices are up 97 per cent in Greater Vancouver over the past 10 years, compared to a 55 per cent increase for condos over the same period.

Real estate prices and affordability challenges ease considerably away from Vancouver, where reports predict a detached house will be increasingly out of reach for typical workers.

“The only place in North America that has fewer people living in single family houses than we do is New York City,” Somerville said, predicting that trend won’t change.

“Young families are going to be living in condos and townhouses unless they want to be living in Langley.”

The cheapest market within Metro Vancouver is actually Maple Ridge. The typical detached house there sold for $488,000 in April – less than one fifth of the $2.5 million benchmark price on the west side of Vancouver.

Just Posted

Surrey woman’s ‘tell-all’ book aims to help those struggling with domestic violence

Second book details abusive marriage, how people failed her

Surrey Mayor Linda Hepner bids farewell in tearful State of City Address

Outgoing mayor announces Director of Housing, looks back at Surrey’s evolution, and pokes fun at her ‘media missteps’

ZYTARUK: Hepner, to her credit, rose to the occasion

She could have used her last address to make political digs, pitches and slights. She did not.

Supportive housing opponent says 110-year-old document should prevent development

Proposed site for Cloverdale project is on land gifted to city by Joseph Shannon in 1908

VIDEO: Story surrounding new playground at Surrey hospital a real ‘tear-jerker’

Dad began planning after his son had surgery in Surrey and he saw too many sad faces

Fresh-faced Flames fend off Canucks 4-1

Vancouver drops second straight NHL exhibition contest

VIDEO: B.C. deer struggles with life-preserver caught in antlers

Campbell River resident captures entangled deer on camera

Scheer pushes Trudeau to re-start Energy East pipeline talks

Conservative Leader Andrew Scheer questioned the Prime Minister over Trans Mountain project

Mistaken identity: Missing dog claimed in Moose Jaw belongs to another family

Brennen Duncan was reunited with a white Kuvasz that was found in Saskatchewan

Abandoned kitten safe and sound thanks to B.C. homeless man

‘Jay’ found little black-and-white kitten in a carrier next to a dumpster by a Chilliwack pet store

Police chief defends controversial marijuana seizure

Advocates said cannabis was part of an opioid-substitution program in Vancouver’s Downtown Eastside

Trans Mountain completes Burrard Inlet spill exercise

Training required, some work continues on pipeline expansion

Supporters of B.C. man accused of murdering Belgian tourist pack courtoom

Family and friends of Sean McKenzie, 27, filled the gallery for brief court appearance in Chilliwack

Most Read