The BC NDP government’s February budget measures to rein in Vancouver’s runaway real estate market are starting to erode sales and prices for higher-end properties, new statistics show.
In March and April, 79 properties in the City of Vancouver sold for more than $3-million, with most being detached houses, according to the Real Estate Board of Greater Vancouver. That sales volume is roughly one-fifth of the 354 transactions at the height of the housing frenzy during the same two months in 2016 and also down sharply from the 147 transactions in March and April of 2017.
The price of detached houses sold in the city last month averaged $2,454,973 – 12 per cent lower than in January, the month before the NDP’s budget. Average prices in the detached category have dropped 3 per cent over the past year, although Vancouver remains Canada’s most expensive housing market.
Upper crust is in the eye of beholder. The B.C. government has deemed properties valued above $3-million to be a fair target for extra taxation, sparking a fight with homeowners who argue they are far from rich.
The West Point Grey Residents Association is upset at what it views to be a wealth-transfer tax on homes assessed for at least $3-million, saying properties seen as elite by the NDP are relatively common in Vancouver.
“Most of the houses that would be affected are old and certainly not luxury,” the association said in a letter this spring to Premier John Horgan and Attorney-General David Eby, who represents the provincial riding of Vancouver-Point Grey.
The NDP is hoping that measures designed to cool off higher-end properties, combined with other policy changes, will have a trickle-down effect to chop prices, too, for condos and townhouses.
But various policy changes have had a muted impact so far on condos and townhouses, according to the real estate board’s data. The price for all types of housing sold last month in the City of Vancouver averaged $1,343,720, up 0.7 per cent from a year earlier.
In the budget, Mr. Horgan unveiled an increase to the province’s annual school tax, affecting the portion of the value of a property assessed above $3-million, with the new tax to be collected starting in 2019, based on valuations on July 1, 2018.
Here is the tiered formula: A 0.2-per-cent tax will be imposed on the portion valued above $3-million and up to and including $4-million; for the portion above $4-million, a 0.4-per-cent rate applies.
For example, a property assessed at $4-million will face extra taxes of $2,000 next year, over and above the usual annual property tax bill, while the owner of a $5-million home will need to fork over an extra $6,000. To use an extreme example, Lululemon Athletica Inc. founder Chip Wilson, who owns a waterfront mansion valued at $78,837,000, would be on the hook to pay an extra $301,348 in 2019 alone, based on that assessment.
Andy Yan, director of Simon Fraser University’s city program, studied BC Assessment data for valuations on July 1, 2017. He found that 19,399 detached houses, or 24 per cent of the total in that category, were assessed at $3-million or more within the City of Vancouver.
The West Point Grey Residents Association asserts the extra school tax is actually a wealth surtax on assets, noting that the money raised will go into the province’s general revenue. Many homeowners are on fixed incomes while others have large mortgages, the group said in its letter, warning that the NDP’s move could “undermine Mr. Eby’s seat.”
Phil Moore, the real estate board’s president, said he has been getting phone calls from worried seniors who have the option to defer their taxes but don’t want to go into debt. “The new tax is causing a lot of anxiety. Their voices are trembling,” he said in an interview on Thursday.
Effective Feb. 21, the NDP government also hiked the property transfer tax on the portion of a home’s sales price above $3-million, part of a series of housing policy moves over the past two years. In August, 2016, the BC Liberals under Christy Clark introduced a 15-per-cent tax on foreign buyers in the Vancouver region. In February this year, Mr. Horgan’s NDP government raised the foreign-buyers tax to 20 per cent and also expanded it to other urban areas.
Government policy changes should be more dramatic, said Paul Kershaw, founder of Generation Squeeze, a lobby group formed to represent the views of Canadians in their 40s and younger. His group is proposing that the NDP introduce an annual 1-per-cent surtax on the portion of a home’s value above $1-million.