A Royal Lepage report on recreational housing values says B.C.’s speculation tax is serving as a “cold shower” for people looking at buying a second home in the province.
Although prices for recreational homes are forecast to increase 5.8 per cent nationwide, Royal LePage is forecasting a 2.8 per cent decline in B.C., saying existing homeowners will be convinced to sell their properties to avoid paying the tax, pushing down home prices.
The speculation tax was introduced in the NDP government’s 2018 budget, targetting foreign and out-of-province investors who do not pay income tax in B.C, including those who leave homes vacant.
The real estate company projects the value of recreational homes in B.C. to be $531,333 by September 30, dropping from the 2017 average of $546,444.
The study was based on a survey of 200 real estate agents who specialize in recreational properties, with 55 per cent of B.C. respondents saying the tax will weaken momentum and keep sales activity from reaching its “true potential”.
Four out of 10 believe the new policies would impact prices.
“While these policies were billed as a move to impede speculation and foreign investment, international purchasers make up a very small portion of the recreational market and the dreaded ‘house flippers’ are an urban phenomenon,” Royal LePage President and CEO Phil Soper said.
On Vancouver Island, the tax will only apply in the Capital Regional District (but not the Gulf Islands and Juan de Fuca) and Nanaimo-Lantzville.
Parksville and Qualicum Beach were excluded after being named in the original plan, and the District of Saanich, Langford, Sidney and North Saanich have all asked to opt out, as well.
The tax is also applied to Metro Vancouver and the Kelowna area.
In 2018, the rate for all properties subject to the tax would be set at 0.5 per cent of a property’s assessed value, regardless of whether the owner is foreign, Canadian or from B.C.
Starting in 2019, the tax rate would be set at two per cent for foreign investors and extended family members.
PROJECTIONS FOR VANCOUVER ISLAND RECREATIONAL HOMES
The Royal LePage report gave projections for the Comox Valley, Gulf Islands and Mt. Washington, all areas excluded from the speculation tax.
Recreational homes on the Gulf Islands are expected to see a big increase for 2018 average prices, with an 8.3 per cent rise in oceanfront homes to $650,000 compared to $600,000 in 2017.
The report predicts a 7.4 per cent jump in non-waterfront property values to $365,000 from $340,000.
Oceanfront homes in the Comox Valley are projected to fall five per cent to an average of $811,000 by the end of September from $854,000 a year earlier.
The drop isn’t as big for non-waterfront homes with a forecast average of $510,000, 0.2 per cent down from 2017.
Resorts and condos at Mt. Washington are expected to have an average price of $250,000, a hike of 4.2 per cent from last year, while chalets are predicted to see a 9.1 per cent increase to $600,000 by the end of September.
“While activity will continue to flourish in areas that are exempted from the new tax, like the Gulf Islands, regions that are not will stagnate, especially when farther away from the majority of city centres,” Realtor Adil Dinani said.