Historically pricey Metro areas to feel impact of tax rise most: demographer
The real estate tax implications of the NDP government’s first full budget will be felt mostly by a small sliver of Metro Vancouver households concentrated in areas of Vancouver’s west side, West Vancouver and South Surrey-White Rock, according to a study by demographer Andy Yan.
The real estate tax measures in Finance Minister Carole James’ budget include a 0.2 per cent increase in school taxes and boost of the property transfer tax from three to five per cent on homes worth $3 million or more, and an expansion of the foreign buyers tax.
The objective, James said, was to help “moderate” rising home prices. In an emailed statement to Postmedia, James went on to say she wanted to target communities affected by property speculation and to ask “people who have benefited from out of control housing prices to pay a little more to help ensure all British Columbians can afford a place to live.”
Yan, director of the City Program at Simon Fraser University, said the tax changes were a first step toward generating taxes from wealth as opposed to income, particularly on wealth flowing into British Columbia from outside the province to purchase real estate.
“You’re really increasing the parking fees and the club rates of the hedge city,” said Yan, referring to foreign investors buying property simply to hold.
Yan ran the numbers to figure out that the measures will apply to 30,578 single-detached homes, just under eight per cent of Metro Vancouver’s total, which are concentrated in a few areas of the region.
“It’s not surprising because these are, historically, (where) the most expensive homes in the region are,” Yan said.
Overlaid on Metro Vancouver’s provincial electoral map, it looks like the tax impacts fall the heaviest on opposition B.C. Liberal constituencies such as West Vancouver-Capilano, West Vancouver-Sea to Sky and Vancouver Quilchena, the riding of party Leader Andrew Wilkinson.
But one of the most concentrated areas in his data snapshot is the UBC Endowment Lands, Yan said, which is in the Vancouver Point Grey riding held by NDP Attorney General David Eby.
More interesting to Yan, however, is that some of the communities, such as southeast Vancouver and West Vancouver, are also areas that have lost population, and areas where it’s believed the most property sales to non-residents are occurring.
There is concern, however, about the real estate tax components of this budget compounding the income tax increases on high-income earners from the government’s September mini-budget, said real estate economist Andrey Pavlov.
“So the negative effects of the latest provincial budget could reinforce that,” said Pavlov, a professor in finance at SFU’s Beedie School of Business.
“In order to improve (housing) affordability, we need housing related measures, but we also need measures that increase the aftertax income of local earners,” Pavlov said.
To Yan, though, the measures modernize taxation to deal with wealth as opposed to income to fund provincial services.
By imposing a higher property transfer tax, as well as the foreign buyers tax, Yan said the government imposes taxation on buyers who might be bringing a lot of wealth into B.C. that might not be reflected in their reported income, as well as capturing some of the value being generated by flipping properties.
“This is just a way of capturing some of that wealth and having that re-allocated to public schools, as an example,” Yan said.