Mike de Jong must have been exhausted after delivering his new budget Tuesday. It’s not easy spending nearly an hour on your feet while patting yourself on the back at the same time. Yet somehow he managed to.
“We’re on track! We’re balanced! We’re strong!” the B.C. Finance Minister told the legislature in introducing his latest fiscal blueprint. “We’re better equipped than any other jurisdiction in Canada to deal with the looming uncertainty and economic headwinds we see building internationally. We’re leading the nation!”
The printed version of the minister’s speech included a record number of exclamation points.
That sound you heard was the central planks of Premier Christy Clark’s 2017 election platform being hammered into place (and the rest of Canada groaning). If there was any doubt what the theme of the governing party’s campaign would be, the budget eliminated it. The government will run on its fiscal record, pure and simple. It just tabled its fourth balanced budget; it leads the country in economic growth and owns the only Triple-A stable credit rating in the dominion. Its debt-to-GDP ratio continues to decline, while spending on health, education and social programs all increased – hikes only made possible, the Finance Minister repeated, through prudent economic stewardship.
And on it went. Page after page after page.
Last week, Ms. Clark raised the ire of Albertans by pointing out what a mess successive governments there had done of managing the province’s finances – in contrast to the wonderful job her government was doing in B.C. On Tuesday, Mr. de Jong couldn’t resist noting how much better off his province was than Ontario, among others, noting that B.C.’s debt-servicing costs this year will be $1.6-billion, compared to more than $4-billion for the country’s most populous province. He also pointed out how low B.C.’s taxes were in contrast to Quebec.
It’s a good thing the B.C. government doesn’t believe in karma.
What people inside B.C., and in particular Metro Vancouver, were most interested in hearing about, however, was measures the government would be taking to deal with an overheated housing market that has caused widespread grief and frustration. On that front, the big move it made was eliminating the property transfer tax for newly built homes up to $750,000. Potentially, it could save a buyer as much as $13,000. Notably, the exemption is only available to Canadian citizens or permanent residents; also, the purchaser will be required to live in the home for at least one year after the purchase date. (Flippers need not apply).
While the move is welcome, the impact it ultimately has on the dire housing situation in Vancouver is debatable. It could help some get into thimble-sized condos, for instance, but new townhomes being built today inside the city are all more than $750,000. The measure could help spur some new construction.
It was also hoped the province would take aim at the luxury home market, which has been the primary target of off-shore buyers, mostly from mainland China. Purchasers paying more than $2-million for any home (new or used) will have to pay a property transfer tax of 3 per cent now, up from 2 per cent. That, I can assure you, will have zero impact on anything. Clearly, the government did not want to take any decision that would negatively impact the high end of the market, given the tax revenue it already generates. So those properties will continue to be gobbled up by offshore investors.
Nor did the government take the advice of a group of Vancouver-area economists who devised a tax that could be applied against those who have bought condos and detached homes primarily as unoccupied investments. This has led to vast swaths of condo towers being dark and empty, a phenomenon that has crept into neighbourhoods of single-family dwellings now too. Clearly, the government did not want to wade into this area either, despite outrage among those confronting some of the lowest rental vacancy rates in North America.
Overall, the government made a philosophical decision not to do anything that might lead to the cooling off of housing prices. Ms. Clark heads a free-enterprise coalition, one that steadfastly adheres to free-market principles. Also, it sees the crisis as one that is primarily centred in Vancouver; and it will not make provincial policy based on problems a few neighbourhoods are experiencing – or so it made clear in explaining its budget rational.
All of which means, we will still be talking about house prices next year, and the year after that and the year after that. Meantime, the government is content to face the electorate on its fiscal record, one it will remind you is the envy of the country.Report Typo/Error