The fallout from the B.C. government's budget continues as out-of-province Canadians found out they will also be hit by the same tax that's intended to dissuade foreign speculators from pillaging the domestic real estate market
The fallout from the B.C. government’s budget continues as out-of-province Canadians found out they will also be hit by the same tax that’s intended to dissuade foreign speculators from pillaging the domestic real estate market.
The speculation tax—it’s 0.5% this year and 2% next year and beyond—applies to people who own property in British Columbia but don’t pay any income tax there. While there’s an exemption for principal residences and properties that have long-term renters, Robert Mogensen, a broker with The Mortgage Advantage, believes hitting Canadians with a tax initially devised for foreign speculators is outrageous.
“I think if Canadian residents own vacation properties in B.C., they should be exempt from that rule,” said Mogensen. “I think it’s ridiculous. I have a number of clients that I’ve done mortgages for bona fide vacation properties that are nothing more than that, and they shouldn’t fall under the same group as people who are buying condos to flip. That doesn’t make any sense.”
British Columbia Finance Minister Carole James hadn’t included Canadian vacationers among the speculation tax’s targets on Tuesday when the budget was unveiled, but she changed tack a day later.
“If you are from outside the province and you leave your home vacant, you will be taxed,” she’s quoted as telling reporters.
Mogensen isn’t surprised.
“I think [the provincial government is] definitely in uncharted, unfamiliar territory given that they haven’t governed for over 16 years, and you have people in positions making these decisions who have no point of reference whatsoever for what they’re doing and what the impact of these changes will be, so I think a lot of this is window dressing,” he said. “The effects of these decisions have not been well thought through and, again, people from Alberta should not be penalized on Shanigan Lake or something like that.”
Ultimately, foreign buyers will consider the speculator tax and the additional 5% added to the original 15% foreign buyer tax the cost of doing business, making out-of-province vacationers the real casualty.
“I’d have to go with a gut feeling that it may affect 50% of those foreign buyers, who have an intention living here, and the other 50% who are just parking money—for them the 5% will become a cost of doing business for them,” said Mogensen. “I don’t think it will be big and I think the people that are only looking for a place to park their capital in Canada won’t care if it’s Vancouver or Toronto, so that portion of the money may end up going outside BC.”
