The BC government expects the province’s housing market will cool off this year and into 2018, as tighter mortgage rules and an eventual increase in interest rates impact sales.
Accompanying this slowdown, the provincial government predicts tax revenue generated through housing market activity will take a hit. In 2017 and 2018, it forecasts a decline of $483 million in property tax revenue — a 23.9 per cent drop, according to its three year Budget and Fiscal Plan published on Tuesday. The government also predicts revenue will return to 2015 and 2016 levels with an average 3.9 per cent annual decline over the next two years.
However, with the addition of a new foreign-buyer tax in Metro Vancouver implemented last August, the government forecasts it will generate $100 million in revenue over 2016 and 2017 and $150 million each year for the following three years. Since the tax was introduced, foreign buyers were involved with 3 per cent of residential real estate deals in October 2016 and 4.1 per cent in November 2016, compared to just over 13 per cent from June to August 2016.
The government’s 2017 budget, released Tuesday, also addressed housing affordability in the province, especially in Metro Vancouver, the country’s hottest housing market. The government says the rapid increase in home and rental prices were affected by increased demand, a limited supply of units and low rental vacancy rates.
“We can’t just focus on getting more people into the market. On its own, without adding to the supply, that’s just going to drive prices higher. And it won’t help those who by choice or necessity are seeking rental housing,” says BC Finance Minister Mike de Jong.
In his budget speech on Tuesday, de Jong outlined details related to the government’s commitment to providing affordable housing, pointing to the $920 million allocated last year to help create almost 5,300 new affordable units across BC. He also noted that the government initiated the BC HOME Partnership program in January, which over the next three years is expected to help over 42,000 first-time homebuyers enter the market with more than $700 million in repayable down payment assistance.
First-time homebuyers can also expect to pay less in property transfer taxes. De Jong announced the threshold for the first-time homebuyers program will be increased from $475,000 to $500,000, saving new buyers up to $8,000 on property transfer taxes.
In order to improve housing affordability, the BC government says the key is to create new housing supply. Over the next year, the provincial government plans on working with local governments to speed up the process of housing applications, approvals and permits for housing developments.