The chief economist of the British Columbia Real Estate Association says the incoming tax on flipping houses may not generate as much revenue as the government expects and could only impact a small number of properties. A real estate sign is pictured in Vancouver, B.C., Tuesday, June, 12, 2018. THE CANADIAN PRESS Jonathan Hayward
VANCOUVER – The chief economist of the British Columbia Real Estate Association says the incoming provincial flipping tax could end up reducing the overall number of homes on the market while only applying to a small number of properties.
Brendon Ogmundson also said the new law may not generate the kind of overall revenue the government is predicting – in part because it runs the risk of discouraging people from putting their homes on the market, resulting in lost property transfer taxes.
“I think that the cost of this policy, and the unintended consequences of it on the supply side of things, are more trouble than it’s worth in terms of its effect on affordability, which is very minimal,” he said.
As of Jan. 1, 2025, homes in British Columbia sold within the first year after being purchased will face a tax rate of 20 per cent of the profit, while that tax rate drops gradually to zero after two years.
Ogmundson said about 10 per cent of real estate transactions in Metro Vancouver take place within two years of a purchase, and many of those would qualify under a long list of exemptions including divorce or job relocation.
He said would-be sellers who don’t qualify for an exemption but are near the end of the two-year window may be tempted to wait it out.
“It’s a very real risk that because of the way this policy is written, how it discourages potential listings, that you could end up with prices higher than they would have been otherwise,” he said.
The provincial budget estimates the tax will generate $43 million in its first full fiscal year, but the association predicts B.C. could lose out on $20 million in property transfer taxes as people put off their sales.
Ogmundson said there will also likely be additional costs related to administering the various exemptions.
Premier David Eby told a news conference Monday that the flipping tax, announced in last week’s budget, is “not a silver bullet” and is only one of a series of actions the government is taking related to housing.
He said anything the government can do to reduce the number of people competing for housing in the market is welcome.
“It’s not going work for everybody, but it’s going to work for some people, and it’s going to restrict speculators and investors from competing with families for a place to live,” he said.
“We actually want the revenue from this tax to be zero. We just don’t want people to be flipping homes in this way.”
The premier announced the idea of a flipping tax last year and Finance Minister Katrine Conroy released details of the pledge in last week’s budget speech.
This report by The Canadian Press was first published Feb. 26, 2024.
