VICTORIA, British Columbia (Reuters) - British Columbia moved on Tuesday to crack down on real estate speculators, expanding its foreign buyer tax and introducing a new speculation tax, as part of a wide-ranging strategy to cool housing prices in Canada’s most expensive real estate market.
The left-leaning New Democratic (NDP) government, under pressure to address skyrocketing home prices and soaring rents, particularly in the Vancouver area, unveiled a 30-point housing plan as part of its first full budget.
It also projected a surplus of C$219 million ($173.2 million) in fiscal 2018/19, as the province posted its sixth consecutive balanced budget, and pledged more money for childcare.
“We can’t end the housing crisis overnight, but we can plan now for the future,” British Columbia Finance Minister Carole James told reporters. “Taken together, these steps will return a sense of fairness to the real estate market.”
The NDP said Vancouver’s foreign buyer tax, introduced by the previous Liberal government in 2016, will be boosted to 20 percent from 15 percent, and expanded it to include numerous other cities.
Foreign buyers, mainly from China, have been blamed for Vancouver’s red-hot property market, where the gap between home values and incomes has widened rapidly in the last five years. The average home in Vancouver now costs C$1.06 million.
The government also announced a speculation tax on the assessed value of homes in urban areas, targeting foreign and domestic investors who park money in housing. The annual levy will be 0.5 percent this year and rise to 2 percent in 2019.
For details of various housing measures:
“You really do need to give this provincial government credit for doing more in a provincial budget for childcare and housing than we have seen in years,” said Paul Kershaw, a professor of population and public health at the University of British Columbia.
The province also moved to clamp down on condo presale flipping - where units are bought and sold many times before construction completes - and to close loopholes allowing foreign buyers to invest through numbered companies and local proxies.
In measures sure to appeal to frustrated voters, the province pledged to end tax breaks for mansions on protected farmland, said it would increase sales taxes on luxury vehicles, and pledged C$1.6 billion over three years for affordable housing supply.
Critics were concerned the new taxes would not help affordability, and noted there was little promised to speed up the development of new housing.
“We have a supply problem,” said Anne McMullin, chief executive of the Urban Development Institute, adding that municipal red tape can hold up construction for many years.
The government will also eliminate medical services plan premiums from Jan. 1, 2020. The premiums, which do not exist elsewhere in Canada, help finance the province’s publicly funded medical system.
British Columbia, with an AAA credit rating, forecast total debt to reach C$65.3 billion in 2017-18, with the debt-to-GDP ratio expected to dip to 15.5 percent in 2018-19 from 15.6 percent in 2017-18.
The province also projected a surplus of C$281 million in 2019-20 and C$284 million in 2020-21 and revised downward the 2017-18 surplus to C$151 million from a previous forecast of C$190 million.
($1 = 1.2645 Canadian dollars)
Reporting by Julie Gordon and Nicole Mordant in Victoria, British Columbia; Editing by Matthew Lewis