The Property Flipping Tax is a sliding-scale tax, with a 20% tax on those properties that are resold within a one-year window and a lesser tax on any sale within a two-year time frame. The provincial government aims to levy this
tax on property flippers who purchase and sell a property within two
years. The tax targets property flippers who are solely looking to
make a profit. According to the Bank of Canada, approximately 3.1% of
homes in Vancouver and Victoria are sold within one year. If you
consider the charts above, courtesy of BCREA Economics, the
participation of homes sold in B.C. throughout a one-year time frame is,
on average, between 2.5-3.1%. The stats do not delineate between those in the business of flipping properties and those with valid reasons for a resell within one to two years.
There
are many reasons families decide to move within a two-year time frame,
and the majority are for purposes that are exemptions to the flipping
tax. This begs the following question: What are exemptions to this "flipping tax"? Exemptions
that could apply include a death in the family, an addition to the
family, employment relocations, martial breakdown, default or
bankruptcy, illness or disability, destruction of the property,
expropriation of the property, and more. Please visit the government of
B.C.'s website: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
What are the effects of the flipping tax? The BCREA Market Intelligence Report notes, "In
other jurisdictions where similar rules exist, such as the United
States, Australia, New Zealand, and Singapore, the effect of such taxes
on prices remains ambiguous; the evidence is mixed and inconclusive, and
if an effect exists, it is minor."
What can be said about the impact on
the market on sellers who hold off listing their homes? The impacts
remain to be seen. However, rational thought would indicate that if
sellers are deferring their listings for a one—to two-year time frame,
this would result in a reduction of listings. This
would lead to a resultant price increase for the limited inventory as
there would be even fewer homes, albeit not a huge amount, for
purchasers to compete for.
Although the government
feels that taxing the small percentage of homeowners who truly "flip"
their properties is a great way to gain additional tax revenue, the
focus should remain on supply-side measures and programs that create the
much-needed housing. Those "flippers" who are taking risks
with their capital to build additional housing units for rental stock
are not the ones who should bear the brunt of the government's short-sighted
policies. On the other hand, those owners who are speculative with
their purchases, looking to make a quick buck, and artificially
inflating the market pricing should bear the tax.
FIRST TIME HOME BUYER?? Call me at 250-884-3980 to chat about the ZERO-DOWN FINANCING OPPORTUNITY! *Some exceptions apply*
Looking to find out what your home is worth?? Call me, and we can discuss a market evaluation.
|
