Provincial economy is too reliant on real estate

Real estate has become to British Columbia what oil is to Alberta. That is, it’s not only a core economic driver, we’re synonymous with it.

I say this as someone who is originally from Alberta and has lived in B.C. for a number of years now. Let me provide a little context./ Earlier this year, we saw that the B.C. government’s revenue from property transfer tax climbed a massive $468 million (or 43.9 per cent over the previous year) for the 2015-16 financial year. In addition, B.C. Finance Minister, Mike de Jong, predicts that this tax will ultimately haul $2.2 billion for the treasury.

Not only that, but get your head around this: The province received more revenue from the real estate sector in 2016 than the combined revenues from natural gas, forestry, mining, energy and Crown land tenures (for the record, these five revenue drivers, are expected to have brought $1.8 billion into provincial coffers).

That’s huge. And you can see why it is attractive to the government.

Here’s the concern though. I think we all know that today’s real estate prices do not correlate with income levels, and, with the recent interest rate rise from the Bank of Canada, with potentially more to follow, we could be looking at a changing housing market.

Given how tied the province’s fortunes are with the real estate sector, even a small correction — which is natural in the housing market — could have a significant impact on the economy and the Canadian economy as a whole.

Now don’t get me wrong, this isn’t a ‘the sky is falling’ message. However, I do feel that the government needs to diversify, encourage and rely on other industries as well.

Housing should not be predominantly responsible for fuelling economic growth in Victoria or Ottawa.

Rather than eliminating tolls, such as on the Port Mann and Golden Ears bridges in Vancouver, perhaps the provincial government could have taken that money to stimulate other industries in the province.

To my mind, being so reliant on a single industry is a concern and not sensible public policy.

What do you think? Is the B.C. economy too reliant on real estate? Is it a concern? I’d love to hear your thoughts.

Mark Walker is a real estate agent and the broker/owner of Kelowna’s Walker Real Estate. His organization runs KelownaProperties.com - Kelowna’s most comprehensive real estate search tool. Walker Real Estate specializes in retirement properties, and you can contact their office at 250.764.4344.