British Columbia will see vacation-home prices drop this year as out-of-province owners list their properties for sale to avoid paying a hefty new property tax being introduced in hot markets, according to a new forecast from Royal LePage.
The real estate firm expects vacation property prices in B.C. to fall by 2.8 per cent by the end of September compared with the same period last year, due to a growing supply of recreational properties listed for sale by owners who want to avoid the new tax.
The province unveiled what it describes as a “speculation tax” in February, aimed at discouraging out-of-province buyers from owning homes they don’t live in. The annual tax, which is based on the assessed value of the property, applies to urban areas around Vancouver and Victoria, but also to some recreational property areas, including regions around Nanaimo and Kelowna.
Royal LePage said its survey of agents who specialize in recreational properties found many expect home buyers will sell their secondary properties, raising the supply of listings in recreational markets. The spate of new listings is expected to push up sales volumes, but the average price is expected to fall by 2.8 per cent to an average of $531,333 in 2018.
The survey found 55 per cent of B.C. agents expect the policy will “weaken momentum” in the region and depress prices.
Royal LePage chief executive Phil Soper said B.C. has Canada’s fastest-growing economy, and would normally be expected to lead the country in recreational-property price growth, but the new tax is going to weaken demand.
“While these policies were billed as a move to impede speculation and foreign investment, international purchasers make up a very small portion of the recreational market, and the dreaded ‘house flippers’ are an urban phenomenon,” he said in a statement.
Albertans, who are one of the largest groups of buyers of recreational properties in B.C., are expected to increasingly shop closer to home, driving up prices in the province’s major vacation centres.
The Royal LePage survey forecasts recreational-property prices in Alberta will rise by 8.9 per cent this year to an average of $770,100, driven largely by price growth in Canmore, near Banff.
Tom Shearer, a broker at Royal LePage Noralta Real Estate, said Alberta has a limited number of traditional recreational markets compared with provinces such as B.C. and Ontario, “where you’re essentially a stone’s throw away from a lake at all times.” The result is that Alberta has the highest average prices in Canada in recreational communities.
“With more locals looking in their own backyard, demand and pricing will continue to grow,” he said.
Prices are expected to rise most significantly in Ontario, where baby boomers are increasingly looking for permanent retirement homes in recreational regions, the survey said.
The survey predicts Ontario’s vacation regions will see 10.4-per-cent price growth to an average sale price of $535,885 in 2018, with prices expected to climb significantly more in some pockets.
Tom Storey, a real estate agent at Royal LePage Signature Realty, said in a statement the baby-boomer cohort is driving part of the demand as they seek to “cash in” on their valuable city homes and move to “extremely affordable” recreational regions for retirement.
“This trend will likely persist for the next few years, pushing prices higher as wealth continues to leave the cities and find its way into more secluded and rural communities,” he said.
Atlantic Canada is expected to be the weakest for recreational properties this year, with prices expected to drop to $228,754 on average, down 7.5 per cent over last year, the survey said.