Just-Add-Salt

Tax hurts Okanagan

On Feb. 20, the B.C. government unveiled its 2018 budget and an accompanying housing plan that included the controversial speculation tax. 

In March, this proposal was modified due to significant outcry. 

The tax is designed to calm high home pries and rents in urban centres that are beyond local incomes. The government states that speculation has contributed to huge price increases and making it difficult for British Columbians to find a home they can afford. 

By pushing these “speculators” out of the housing market, this will turn vacant properties or short-term vacation rentals back into the housing market for people who live and work in B.C. to buy or rent at a more reasonable amount. 

While the government wants to address housing affordability, is this tax one that will accomplish this goal?  Or will it do the opposite by killing jobs, hurting Okanagan tourism (and real estate) and make the housing affordability issue worse?

Is this tax going after the real speculators, or is it only targeting hardworking taxpayers and those from our neighbouring provinces who visit B.C. and specifically the Okanagan to vacation, bringing their paycheque to share with businesses that depend on those seasonal tourism dollars to survive?

The government states that

“the tax is designed to capture foreign and domestic speculators, satellite families who live in B.C. but do not pay their share of income taxes, as well as homeowners who hold vacant property in designated urban centres. Over 99 per cent of British Columbians are estimated to be exempt, because they will not have a vacant second home in the affected areas.” 

In the Okanagan, we rely on these so-called “speculators” (we have a different name for them; we call them “tourists," “patrons,"  “clients," and in, some cases, “friends” and “family”) to fuel our economy. 

They visit our communities, buy our groceries, drink our coffee, rent our boats, houses and condos, eat in our restaurants and even drink our more expensive alcohol and buy our inflated fuel. 

No, they do not contribute to our British Columbia income tax base, but for the most part, these Okanagan “speculators” do pay Canadian income taxes to support federally funded programs that all Canadians benefit from.

Without these “spectulators,” our communities and the many tourism-oriented businesses suffer or cease to exist.  

We can argue that areas such as Vernon, Penticton and the Shuswap are not affected by this tax, but don’t kid yourself. This will affect any tourist town in B.C. because Albertans are furious. 

They were angry and annoyed with British Columbians about the lack of cooperation over the Kinder Morgan pipeline, and now they are livid about this new tax.

We have spoken to many Albertans and most, if not all, are upset. They would rather pull their money from our communities – regardless of location – than support our provincial government for one more day. 

If you are against this speculation tax, like I am, there is a way to fight it. Leading the charge in the effort to fight this tax is The Coalition. 

This coalition recommends that the B.C. government immediately scrap the Speculation Tax and do the following to address housing affordability:

  • Target real speculators, not long-term homeowners, including many out-of-province residents;
  • Protect our local tourism dependant economies, like Kelowna and the South Island;
  • Reduce the cost of delivering housing units by exempting vacant development land from this tax; 
  • Exempt Canadian and British Columbian taxpayers from this unfair tax measures.

If you’re also concerned, please visit their website, and join the fight. 





Budget targets house prices

How the 2018 budget affects Okanagan real estate

In an effort to cool housing prices in British Columbia, the government’s 2018 budget has introduced numerous changes that affect our real estate market in the Okanagan. 

The following tax changes are being imposed:

Property transfer tax changes

A buyer is charged property transfer tax when purchasing property in British Columbia (some exemptions apply).  The amount of tax is based on a percentage of the fair market value of the land and improvements on the date of registration of the purchase. 

Effective Feb. 21, 2018, the property transfer tax will increase a further two per cent on residential property on the portion of the fair market value greater than $3 million. 

Foreign buyer tax changes:

The existing 15 per cent foreign buyer tax that applied only to Metro Vancouver is being raised to 20 per cent and will apply to expanded areas. This new higher tax will also cover the Victoria and Nanaimo land districts on Vancouver Island, the Fraser Valley, Kelowna and West Kelowna.

Speculation tax added:

This tax will cover the same regions as mentioned above, and is aimed at absentee homeowners. The tax will start at 0.5 per cent of a home’s assessed value for the 2018 tax year and increase to two per cent in 2019. It appears that if the home is a principal residence, if the home is rented long term, or if the owner pays income tax in B.C. – these homeowners will be exempt. The effect on owners of vacation properties in our sunny Okanagan is not yet clear. 

As reported by the Vancouver Sun: 

“NDP Finance Minister Carole James acknowledged her government hasn’t fully modelled the effect of the new tax measures on B.C. real estate prices or calculated the cost of increased auditing and enforcement. But the government wants housing prices to drop, she said.”

Obviously aimed at cooling the housing price mayhem in the Lower Mainland, these taxes are now spreading to include the Kelowna and West Kelowna real estate market, although at this time, does not cover the North Okanagan, South Okanagan or the Shuswap. 



Buying in a seller's market

We are often asked by first-time buyers whether it makes sense to buy in a market as hot as the Okanagan has seen for a long time.

The answer is yes, assuming you’re planning to be in the market for the long haul. In any market, a plan to own for the short term, or considering a fix and flip, is a riskier one.

There are a number of factors that make the decision to buy a two thumbs up. These factors are:

  • Interest rates are still historically low. Although we have experienced a few rate hikes during the past few months, interest rates are still extremely favourable.
  • Renting is often costing more on a monthly basis. As rents creep up (maybe a little faster than creeping), even as house purchase prices increase, the math still usually works in favour of paying a mortgage versus renting.  
  • Over the long run owning real estate is always a great investment. History always seems to repeat itself. Even most of those who purchased during the last real estate boom ending in late 2008 are realizing gains if their homes are sold today. The trick is to stick it out and wait until you are in a position to sell high (or higher!).
  • Owning is an investment in your future. If you are renting, continuing to rent is helping someone else invest in theirs. 

Investing in real estate is one of the best investments you can make. If you are purchasing a home as your principal residence, it is one of the best tax-free investments you can make.

Even though prices are higher than they were a few years ago, or even last year, a long-term investment in your future is always a good one. 

Our recommendation is buy now – and don’t wait. You don’t want to be looking back in a year saying to yourself: “I wish I would have bought when the prices were lower last year!”



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Buying a mobile home

Mobile homes are usually attractive to buyers for two reasons: 

  • affordability
  • the ability to obtain privacy on a limited budget.

The first item to consider in your decision making is whether you want to purchase a manufactured home on its own land. If you have an interest in land plus the building, then you have an excellent opportunity for your investment to increase in value.

If the home is on a leased piece of land (i.e. what is termed “pad rental”) the land is not included in the sale. 

You are purchasing the structure only and the right to continue to pay the landowner pad rent. Although purchasing a home without an interest in land limits your investment potential, it still allows you to create a lovely home for yourself and your family.

The second item to consider is, if the manufactured home is on a leased pad, how long and how secure is the lease?

  • Is it a private lease?
  • Is it a First Nations lease?
  • If it is a First Nations Lease, is the lease directly with the First Nations landholder or is it with the Crown?

All these considerations come into play and can make your decision making more complicated.

The third item to consider is the age of the home. 

If you need financing, older manufactured homes on pads are more difficult, if not nearly impossible, to finance with a bank. 

Because pad rental is involved and there is no interest in land, most banks will generally view the financing as a chattel loan (similar to a car loan, rather than a mortgage), which may be at a higher interest rate and shorter amortization period (i.e. period of time to pay the loan off) resulting in higher monthly payments. 

As you can see, the ultimate decision on what type of manufactured home to purchase and where is a complex one and involves many factors.

Always the most prudent decision is to discuss the pros and cons with your real estate professional and, if you are looking for financing, your mortgage broker or banker. 

All in all, owning any type of home, whether it be manufactured or otherwise, is a positive investment in your future. 



More Just Add Salt! articles

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About the Author

Lisa Salt is a Vernon born Realtor® who, along with her husband Gord Fowler from Calgary, lead one of the most successful and dynamic real estate teams in the North Okanagan. 

An international clay target shooting champion, Lisa brought the attributes of hard work and diligent focus to the real estate industry to create the success she and her team have today. 

To experience the local knowledge and expertise that only someone born and raised in the Okanagan can offer, call Lisa today and 'Just Add Salt'.

Website link:   http://www.saltfowler.com

Contact e-mail address:  [email protected]

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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