That Second Home in Vancouver Might Just Be Affordable After All
(Bloomberg) -- Some of Canada’s prettiest and priciest real estate could be a little more affordable this fall, if you don’t mind a pesky tax or two.
Prices for “recreational property,” such as second homes, in British Columbia will drop in 2018 as a new tax to deter speculation and check runaway real estate values spurs some to sell and discourages others from buying, according to a forecast by the Toronto-based brokerage firm Royal LePage, a unit of Brookfield Real Estate Services Inc. The average price is expected to fall by 2.8 percent to C$531,333 ($411,408).
The new speculation tax, put in place this year by the provincial government, will ding owners of non-primary residences in certain areas, including some parts of the metropolitan Vancouver region and Abbotsford, by about 0.5 percent of the property’s value. Next year it will rise to 1 percent for Canadians outside the province and 2 percent for foreign buyers.
The taxes will “weaken markets across the province, driving would-be purchasers to invest elsewhere,” Royal LePage President Phil Soper said in a statement Wednesday. “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.”
In other words, the new rules will prompt some owners to sell their second homes and push down prices as supply grows and buyers, many from neighboring Alberta, look elsewhere, Royal LePage predicts.
A tax of 1 percent might not seem enough to put an eager Albertan second-home hunter off a C$500,000 purchase. But the taxes’ escalation -- and fears of more to come -- in what is already among the most expensive markets for second homes in Canada could send a chill across the Rockies, Adil Dinani, an adviser at Royal LePage, said in an interview.
For Canada’s recreational-property market as a whole, Royal LePage expects to see growth this year of 5.8 percent, to an average of C$467,764, buoyed by affluent Gen Xers (whom the report pegs at 36 to 51 years old) and retiring baby boomers. Ontario’s and Alberta’s markets will lead the increase, up 10.4 percent and 8.9 percent from last year, respectively, to C$535,885 and C$770,100.
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