The British Columbia government has been rolling out new policies and regulations that have significant effects on the real estate market. Here is an overview of what you should expect from these changes:
New tax measures applied to residential properties
- The speculation and vacancy tax
Taking effect for the first time in 2019, the speculation and vacancy tax is designed to discourage speculation – or the purchase of real estate in the hopes that the properties will increase in value – and leaving homes unoccupied. The measure aims to improve the availability of housing options by making empty homes available to those who need them.
Under the terms of this measure, foreign real estate owners and members of satellite families will be levied a 2% tax based on the assessed value of the home starting 2019. Satellite families are defined as individuals or spouses whose majority of total income (earned anywhere in the world) is not reported on a Canadian tax return.
Principal residents can declare for exemption from this tax annually, resulting in a tax rate of only 0.5%. Second homes may also be rented out to claim exemption, but the property must be occupied for a minimum of six months every year (rental periods of less than one month do not count toward the minimum).
The speculation and vacancy tax applied in BC should not be confused with the empty homes tax levied in the City of Vancouver.
- An expanded foreign buyers tax
Introduced in 2016, the foreign buyers tax was increased in February 2018 and expanded to cover more locations in British Columbia. The one-time tax increased to 20% of the assessed property price, rising from the previous 15% rate.
The tax affects any real estate buyer who is a non-Canadian citizen, not a permanent resident of Canada, and corporations that are foreign-registered. Canada-registered enterprises that are foreign-controlled either in whole or in part are also affected by this tax.
- Tax measures affecting properties worth $3 million or more
In February 2018, the government introduced two notable tax reforms, which have a profound impact high-end properties. First, the Property Transfer Tax (PTT) was raised from 3% to 5% of the home’s assessed value.
Second, homes valued at more than $3 million are now levied a 0.2% school tax. For homes worth more than $4 million, a 0.4% tax rate applies.
Slowing pre-sales are impacting BC’s housing supply
The more stringent tax measures implemented by the government are affecting more than just sales numbers and real estate prices in British Columbia. Supply may also take a hit soon. Because of low pre-sales capping the finances required to resume construction, builders have been putting major development projects on hold.
The Land Owner Transparency Act is in effect
In May 2019, the Land Owner Transparency Act officially received royal assent. The new legislation mandates the creation of a publicly accessible registry of beneficial property ownership. This will make sure that all information about all direct and indirect beneficial in land are on public record.
Under this law, corporations, trusts, and partnerships that hold beneficial interests in British Columbia land will be considered as reporting bodies with an obligation to file transparency reports. These reports are intended to reflect required information about their interest holders.
Failure to comply with these rules will subject the corporation or individual to corresponding fines, ranging from $25,000 (or 15% of the assessed property value) to $100,000.
Do you need help understanding how these new rules and regulations affect how you can own real estate in BC, Canada? Talk to the experts at Don Munro Real Estate. Call us today at 604.817.7338 or email botsoldmunro(at)gmail(dotted)com.