The B.C. government's new luxury tax on properties in the province that sell for more than $2-million will cast a wide net over the market for single-family detached houses in Vancouver.
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 board cautions that averages skew the picture because the most expensive properties are included, saying a better barometer is the benchmark price – a representation of the typical house. Within Vancouver's city limits, the benchmark price for detached properties hit a record $1.94-million last month, or a 26-per-cent gain from a year earlier.
Data compiled by Royal LePage show that 44 per cent of the total number of detached houses that sold in the city last year went for at least $2-million.
In 1987, the B.C. government introduced the property transfer tax: On the initial $200,000 of the purchase price, the home buyer must fork over 1 per cent and then pay a 2-per-cent tax rate on the amount above $200,000.
That formula remained untouched until this week's provincial budget, when Finance Minister Mike de Jong unveiled the luxury tax, which took effect Wednesday. Buyers will need to pay a tax rate of 3 per cent on the portion above $2-million, but the 1-per-cent rate would still apply on the first $200,000 and the 2-per-cent rate would apply on the portion between $200,000 and $2-million.
Mr. de Jong said the housing market looks much less expensive when the search is broadened to include condos and townhouses in Vancouver's suburbs. B.C. budget documents contain a chart to emphasize that, when the perspective is expanded to include all types of housing in Metro Vancouver, properties above $2-million accounted for 7 per cent of the total number of sales last year.
Many properties in Vancouver's Point Grey neighbourhood sell for at least $5-million. "There is more to British Columbia than just Point Grey," Mr. de Jong said in Victoria on Tuesday.
In response to criticisms that the government needs to do more to cool down the hot housing market, he said any measures must avoid hurting existing homeowners who have much riding on their property values. "If by cool you mean actually reduce the value of people's major asset, their home, clearly we're not interested in taking that step," Mr. de Jong said.
A recent study by researcher Andy Yan indicates that 32 per cent of Vancouver's detached homes had assessed values of more than $2-million on July 1, 2015. Since then, housing prices have jumped nearly 15 per cent.
The city is split into the west side and east side on real estate maps. Most of the west side's detached homes had assessed values of at least $2-million last July.
Mr. Yan, acting director of Simon Fraser University's city program, found that assessed values last July for detached houses averaged $2.91-million on the west side and $1.25-million on the east side. His study found that assessed values in Vancouver for 66,825 detached properties averaged $1.91-million.
"It goes to show that a single-family detached house in Vancouver has become a luxury product," said Dan Scarrow, managing director at Macdonald Realty Group.
He examined the high-end market for detached houses, condos and townhouses in the Vancouver region. There were 1,552 properties that sold for $3-million or higher in Metro Vancouver last year, compared with 842 in that price category that traded hands in 2014, according to data compiled by Mr. Scarrow.
Detached houses accounted for 94 per cent of those sales in 2014 and 2015, with most of the transactions occurring on Vancouver's west side and in the municipality of West Vancouver.
High-end sales have surged in Metro Vancouver. There were only 10 property sales at $3-million or more in 2000.
Mr. Scarrow opened a Macdonald Realty office in the fall of 2014 in Shanghai, courting investors in Vancouver's residential and commercial real estate sectors.