Image Credit: Black Press
The Provincial government has announced it will impose a a 15 per cent property tax on all foreign real estate buyers in Vancouver effective August 2nd, 2016. After months of government refusal to intervene in a heated urban market, Finance Minister Mike de Jong introduced the tax as part of legislation aimed at addressing low vacancy rates and high real estate prices in southern B.C. Currently, the tax does not extend to municipalities outside Metro Vancouver, but could be amended to include those later. Many Kelowna residents are wondering if the effects of this tax will be felt in the Okanagan.
The justification according to Finance Minister Mike de Jong, is that 86 per cent of the more than $1 billion spent by foreign buyers in the province over a six-week period ending in mid-July was purchased in Metro Vancouver. He added a similar tax in other countries have resulted in a levelling of the market (source: Castanet News). Critics are arguing the tax might pop the real estate bubble, causing a rapid reversal of the long standing sellers’ market.
While the tax only applies to Vancouver, some feel there may be an impact on the local real estate market. Those foreign investors who are dissuaded from buying in Vancouver may set their sights on cities like Victoria or Kelowna. We are already seeing repercussions of the inflated property values in Vancouver as people sell their homes and relocate here, driving demand and prices up.
One thing is for sure, the tax will create a large windfall in revenue for the BC government. Minister De Jong says this revenue will go into a new provincial fund to provide rental and social housing. It remains to be seen whether this move will cool the market, or trigger declining property values as similar efforts have done in other major cities. Meanwhile Okanagan residents are sure to be watching closely for any potential ripple effects.
JOHN ANTLE MORTGAGES – KELOWNA’S MORTGAGE SPECIALIST
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