British Columbia has tabled legislation to enact a 20 per cent flipping tax on those who sell their home within the first year of ownership.
Finance Minister Katrine Conroy told the legislature that the tax is aimed at speculators who use housing only to turn a quick profit and it will make “profiteers think twice about a practice that inflates housing costs during a housing crisis.”
The tax rate starts out at 20 per cent of income earned from a property sold within 365 days, falling to zero at 730 days when the tax no longer applies.
Conroy told reporters Wednesday that her office estimates the tax will apply to about 4,000 home sales a year.
British Columbia’s budget projects a record $7.9 billion deficit and announces a 20 per cent tax on homes bought and sold within a year starting in 2025. The government says the measures are meant to address the cost of living and spur home building in the province while critics say the spending is reckless.
“Wealthy investors are using housing as a short-term investment to make a fast profit, while people looking for homes can’t get into the market,” she said.
“Buying a home is one of the biggest decisions and milestones in people’s lives, whether it’s their first apartment or a new home to make space for the growing family, and we don’t think families should have to compete against speculators when they’re making such an important decision.”
The tax was introduced in this year’s budget, which says it is expected to generate $43 million in the first full fiscal year and the province has promised the money will go directly to building affordable housing.
Heidi Marshall, with the Condominium Homeowners Association of B.C., told the news conference that speculators often create an unstable environment for strata corporations.
“Simply put, speculators are often more interested in profit, and not necessarily what is in the best interest of the strata corporation,” she said.
“The result is they often vote against needed repair and maintenance or an increase in strata fees. This legislative change will support sustainable strata communities in B.C.”
The government says exemptions will exist for life events like separation, divorce or death. The tax would go into effect on Jan. 1, 2025.
Conroy said it also wouldn’t apply to sellers who add to the housing market, such as those creating a basement suite.
The provincial tax is on top of the federal tax on flipping that started in 2023.
B.C. Housing Minister Ravi Kahlon said about seven per cent of the province’s housing sales in the last two years have been speculative in nature, meaning the federal tax is “not enough.”
Expert says tax won’t have short-term impact
The British Columbia Real Estate Association has said the tax will lower sales in the province by 1.7 per cent, have minimal impact on home prices, and risks discouraging people from putting homes on the market.
Bryan Yu, chief economist with Central 1 Credit Union, said it’s unlikely the tax would have much of an impact on the housing market, at least in the current cycle.
“In the current environment, we think about the fact that the market isn’t very strong,” Yu told CBC News. “Prices themselves are actually really unchanged, in large part, [over] the last couple of years.”
Yu says the tax could be most beneficial if interest rates decline, limiting the upward momentum of prices.
The economist also said that one of his concerns with the flipping tax is that it could limit housing pre-sales due to uncertainty, which could constrain further housing supply from being built.
Conroy said the tax is one tool being used to make housing more affordable.
“We feel that it’s a win-win for everybody. It’s going to create housing. And if it doesn’t, if they’re going to pay their taxes, that money goes directly to create more housing. So it’s all about creating housing,” she said.