The promise of the B.C. budget was that help is on the way so that more families can realize the dream of home ownership. The reality, say academics and economists, is that the measures will do little to allow those families to get into Metro Vancouver’s superheated real estate market.
“It is like bringing a penknife to a gun fight,” said real estate economist Tom Davidoff of the University of B.C.’s Sauder School of Business. “The impact will be pretty darn minimal.”
Tuesday’s budget increases the Property Transfer Tax on properties sold for more than $2-million, from the current 2 per cent to a rate of 3 per cent. That change is expected to pay for a new exemption from the tax on new homes sold for up to $750,000, a measure that was crafted to encourage more new home construction.
But the savings to the home buyer who qualifies for that exemption, worth up to $13,000, could simply end up in the builder’s pocket because of the fierce competition for homes in the under-supplied markets in the Metro Vancouver region, he said.
Robert Kavcic, senior economist for BMO Capital Markets, agreed. “I honestly don’t think it will do a lot to help affordability,” he said. “At the end of the day, it could just end up boosting prices for new homes in that sub-$750,000 range. If someone is saving $10,000-$13,000 in taxes, there is $10,000-$13,000 more in their budget to bid.”
Finance Minister Mike de Jong said in an interview Wednesday he can put more money into people’s pockets with the measures announced in his budget but it may take some time before the new supply begins to make a measurable difference in the toughest markets.
“For people sitting on Kits Beach, this might be challenging, but you have got to take into account the broader needs of the entire province of British Columbia. Housing challenges and the importance of getting into the housing market are not unique and exclusive to [Vancouver’s] Point Grey.”
Vancouver Mayor Gregor Robertson bristled at the suggestion that people grappling with unaffordable housing in the city are unreasonable in expecting some relief from the provincial government. The average price for detached houses that sold last month in the City of Vancouver soared to a record $2.87-million, rocketing up 46 per cent since January, 2015, according to the Real Estate Board of Greater Vancouver. The B.C. budget offered very little that will help people trying to live and commute in the city, Mr. Robertson said.
“It’s ridiculous to start pitting communities against each other,” he said in an interview. “Vancouver has the most successful economy of any city in Canada right now and we are driving the success of B.C.’s economy. It’s important to address affordability to keep Vancouver growing and diversifying.”
Premier Christy Clark told reporters at a news conference in Vancouver that widespread speculation reported on Vancouver’s West Side may very well be trickling down to make the rest of the region more unaffordable, but the government will not do anything to reduce the equity homeowners have built up in their properties.
“There are 100 different things that have that impact [on affordability] and [speculation] would be one of them, but we try to affect as many things as we can,” Ms. Clark said. “What experts have said, and one of the things they’ve said most often, is they want to see a luxury tax on high-end homes and we brought that in.”
Ms. Clark was referring to the new 3-per-cent tax rate on properties sold for more than $2-million. But she said the rate was set not to modify prices, but to pay for tax breaks at the low end of the market.
“Our focus was to take the new tax that was introduced and invest all of it in reducing taxes not in increasing public spending,” said Ms. Clark.
The Premier spoke Wednesday at a news event at the downtown Vancouver headquarters of bookkeeping startup Bench, which moved from New York to Vancouver in the summer of 2013. Ian Crosby and Jordan Menashy, co-founders of Bench, said that they have had no problem recruiting and retaining employees in such an expensive city.
“So far in the business, it hasn’t been an issue where someone didn’t want to come because they thought Vancouver was unaffordable,” Mr. Crosby said.
In recent months, the Premier has unveiled the provincial government’s plan to attract such high-tech firms to set up shop in British Columbia. But leaders in that industry, such as Hootsuite founder Ryan Holmes, are now saying the high cost of housing is hurting them and will continue to hamper their ability to hire top-tier talent to Vancouver offices.
Michael Tippet, CEO of Wantoo, an online software platform that collects and organizes customer feedback, said the government’s budget offers little more than “token moves” to help homegrown high-tech firms. “Starting a company is a bit like starting an art career – it’s pretty hand-to-mouth,” said Mr. Tippet, who ran Hootsuite’s new products division for two years. “Good, ambitious, hungry entrepreneurs are not too flush with cash, so anything that affects affordability has a disproportionate impact on entrepreneurs.”
Mr. Tippett questioned the wisdom of the government’s assertion that plenty of affordable housing stock exists in Vancouver’s suburbs, noting that an urban core where people live and work is central to the “collaboration and cross-pollination” that breeds success in his industry.
“[That] is something you want, it certainly should be an option,” he said.
With a report from Brent JangReport Typo/Error
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