Government Needs Transitional Rules For All Transactions Impacted By Taxes Introduced In Budget 2018

New taxes unlikely to stabilize housing market

Victoria, BC – February, 2018. The British Columbia Real Estate Association calls on the government to introduce transitional rules for all transactions impacted by the new tax measures introduced in Budget 2018. The new tax measures come into effect on February 21, 2018. The Property Transfer Tax (PTT) increase to 5 per cent for properties over $3 million, as well as the increase to 20 per cent and expansion of the Foreign Buyer’s Tax to other parts of the province will have an immediate impact on transactions underway.

When the Foreign Buyers Tax was introduced in 2016, consumers and REALTORS® were frustrated by the number of collapsed deals due to how the tax was introduced. At the time, the Association called for grandfathering of transactions underway to ensure a smooth transition. While the province has indicated transitional rules for the expansion of the Foreign Buyers Tax to other parts of BC, the Association believes this should apply to all transactions.

Of additional concern, the “speculation” tax introduced in the budget will affect British Columbians who own or want to invest in those markets by buying a second home or recreational property.

The Association welcomes measures in Budget 2018 to increase the supply of affordable housing in British Columbia. These initiatives are important steps in supporting those who need the most assistance to find and afford housing. However, the government missed the opportunity to help homebuyers across the province by increasing the thresholds to the Property Transfer Tax (PTT) or index those thresholds to reflect the changing real estate market.

The new tax measures introduced by the government to “stabilize the housing market” are unlikely to achieve the intended objective. The taxes ignore the major culprit – matching housing supply and demand within a reasonable timeframe. Additional taxes, whether targeted at foreign buyers or speculators, do not reduce the gap between when a housing project starts, and when it is available to purchase.

For more information, please contact:  Gino Pezzani.

BC budget includes new real estate taxes and spending commitments

Housing was the dominant issue in today’s provincial budget.

The government released a 30-point housing strategy aimed at reducing housing demand, curbing tax fraud, building affordable housing, and increasing security for renters.

New tax measures include increasing property taxes and property transfer taxes on residential properties valued above $3 million, expanding the foreign buyer tax, and implementing a housing speculation tax.

“We welcome the provincial government’s commitment to address money laundering concerns and increase the supply of affordable, social, and rental housing in our province,” Jill Oudil, Board president said. “We’re concerned, however, about the series of tax measures announced today. The budget introduces new taxes, hints at future taxes, and hikes existing taxes on housing. Taxes don’t make homes more affordable.”

Below is a summary of the key real estate measures announced today. There’s considerable information to go through. We’re analyzing each item to understand the implications to you and your clients and will report back with more information and analysis in future communications.

Affordable housing

  • The province is investing $6 billion in affordable housing to create 114,000 homes over the next 10 years.
  • The province will enhance local government capacity to build and retain affordable housing.
  • The province will require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases.
  • The province intends to track beneficial ownership information.
  • The province will collect additional information to increase transparency and strengthen enforcement in real estate.

Tax measures

Speculation tax

  • The province will implement a new speculation tax on residential properties, targeting foreign and domestic homeowners who don’t pay income tax in BC. This includes those who leave homes vacant.
  • The tax will apply to the Metro Vancouver, Fraser Valley, Capital, and Nanaimo Regional districts and in the municipalities of Kelowna and West Kelowna.
  • In 2018, the tax rate will be $5 per $1,000 of assessed value. In 2019, the tax rate will rise to $20 per $1,000 of assessed value.
  • The province will administer the tax and will collect data to enforce it including, social insurance numbers, household information, and world-wide income information.

Foreign buyer tax

  • Effective Feb. 21, 2018, the foreign buyer tax will increase to 20 per cent from 15 per cent and will be extended to the Fraser Valley, Capital, Nanaimo, and Central Okanagan Regional Districts.
  • If the property is located in the Capital Regional District, Fraser Valley Regional District, Regional District of Central Okanagan, or Nanaimo Regional District, and the property transfer is registered on or after February 21, 2018, there are transitional rules available here.

Property Transfer Tax

Effective Feb. 21, 2018, the Property Transfer Tax on residential properties above $3 million will increase to five per cent from three per cent.

Provincial School Tax

Beginning in 2019, the provincial school tax will increase on most residential properties in excess of $3 million.

Database on pre-sale condo assignments

The province will require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases. The information will be reported to a designated government office and shared with federal and provincial tax authorities to ensure taxes are paid.

Online accommodation PST and MRDT

Online accommodation platforms are enabled to collect and remit the Provincial Sales Tax and Municipal and Regional District Tax (Hotel Room Tax).

Property tax treatment for ALR land

As part of the Agricultural Land Reserve (ALR) review, the province is examining residential land in the ALR to ensure land is used for farming.

Clarity of property ownership

Compelling access to MLS®

The province plans to enable tax administrators to compel access to information relevant to property transfers, such as information held in a MLS® database. (We’re asking government for clarification.)

Beneficial land ownership registry

The province will require additional information about beneficial ownership on the PTT form.

Administered by the LTSA, the information will be publicly available and shared with federal and provincial tax and law enforcement authorities. Legislation will be introduced to require BC corporations to hold accurate and up to date information on beneficial owners in their own record offices available to law enforcement, tax and other authorities.

Task force on money laundering and tax evasion

The province will work with the federal government to formalize a multi-agency working group on tax evasion, money laundering and housing.

Residential Tenancy Branch

Increased funding to the Residential Tenancy Branch to reduce wait time, improve service and deal with disputes more quickly, as well as strengthening the Residential Tenancy Act and the penalties for those who repeatedly break the law.

Read the Homes for BC 30-point plan for housing affordability

Read the Budget press release

Read the Fiscal Plan (opens a 157-page pdf)

Read the Budget 2018 Speech

For more information, please contact: Gino Pezzani.

Does Vancouver’s Empty Homes Tax Apply to Vacant Land and Leased Land

Vancouver home owners who leave their property empty for more than six months a year will pay the Empty Homes Tax (EHT) at a rate of one per cent of the property’s assessed value.

City of Vancouver Logo

But what about vacant land? What about homes on leased land?

We asked lawyer Ed Wilson, partner at Lawson Lundell, LLP. This is his response:

Residential vacant land

Yes. Any property, including vacant property, is potentially subject to the EHT if the property is classified as Class 1, Residential by BC Assessment. The city decided to impose the EHT on vacant property to avoid owners prematurely demolishing homes and not promptly rebuilding a home on the property so as to avoid the EHT. This may catch a home owner whose home consists of two adjacent lots, with all the improvements located on one of the two lots.

Leased land – City of Vancouver

Yes, but:

a)    if the city owned Class 1 lands and there are no tenants, there’s no tax as the city doesn’t pay tax on its properties;

b)    if the property is city owned Class 1 lands and leased to a third party but not occupied by warm bodies, it’s taxable unless an exemption applies (for example, under construction with permits); or

c)     a “regular old leasehold condo” that’s vacant is taxable.

Leased land – First Nations

a)    There’s no tax if the leasehold property is on First Nations reserve lands.

b)    If the lease isn’t on reserve lands, for example, lands owned in fee simple by a First Nation directly or indirectly) such as the Jericho lands, the property is taxable.

What the City of Vancouver said

We also asked the City of Vancouver for clarification. Here’s what they told us:

If a property is a leasehold strata unit leased from the city or another organization, where the property is on one parcel and in a building with separate rental units, then one unit would need to be used as a principal residence or rented for at least six months of the tax year.

This can differ depending on the civic address and can be a case by case basis.

If you have questions, please contact:

Sophie Harrhy, Change Lead, Vacancy Tax

604.829.4312 Ext. 88637; (E) sophie.harrhy@vancouver.ca

Resources

BC Real Estate Association, A Guide to Vancouver’s Empty Homes Tax, July 4, 2017

For more information, please contact: Gino Pezzani.

For BC Home Owners: Property Taxes 101

Home owners and businesses received their annual property tax notice in June. Property taxes are due the first or second business day in July, depending on the municipality.

No tax notice?

Property owners who didn’t receive a tax notice should contact their municipal finance department to get a duplicate notice. It’s the property owner’s responsibility to ensure a municipality has the correct mailing address.

New property owners who didn’t receive a tax notice, or received a tax notice with the previous owners’ name(s) on it, should:

Property taxes must be paid and the Home Owner Grant claimed by the due date to avoid late penalties.

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Reduce your taxes with the Home Owner Grant

The BC Home Owner Grant Program helps reduce residential property taxes for Canadian citizens and landed immigrants who are permanent residents and whose home is their principal residence.

Seven types of grants

  1. Basic Home Owner Grant – up to $570 for qualifying home owners. For 2017, the grant is reduced by $5 for each $1,000 of assessed or partitioned value over $1.6 million. It’s eliminated on homes assessed at $1.714 million in Metro Vancouver, Fraser Valley and Capital regional districts, and $1.754 million in a northern or rural area. Learn more.
  2. Home Owner Grant for Seniors – an additional grant up to $275 for qualifying home owners age 65+. The total basic and additional grant amounts add up to $845 (or $1,045 in northern and rural areas). The grant is reduced by $5 for each $1,000 of assessed value over $1.6 million and eliminated on properties assessed at over $1.769 million ($1.809 million in northern and rural areas).If any additional grant amount has been reduced or eliminated due to the $1.6 million threshold, property owners may be eligible for the low income grant supplement. Apply for the home owner grant and the low income grant supplement separately.
  3. Home Owner Grant for Veterans – most veterans can apply for the home owner grant as a person under 65, a senior or a person with a disability. Veterans with an adjusted net income of $32,000 or less may qualify for the low income grant supplement. A surviving spouse of a veteran may qualify for a low-income grant supplement.
  4. Home Owner Grant for People with Disabilities – home owners who are disabled or have a disabled spouse or relative living with them in a principal residence may qualify for this grant.
  5. Grant for deceased home owner – a spouse, child, grandchild, parent, brother, sister of the estate of a property owner whose death occurred in the current year and who would have qualified for the home owner grant, can apply to receive the home owner grant for a property that is still registered in the name of a deceased owner or in the name of the executor or administrator of their estate, if you meet the qualification requirements.
  6. Multiple Home Owner Grant – multiple Home Owner Grants can be claimed by the owner on eligible buildings or land.Eligible buildings must be one of the following:
    • a housing co-operative building;
    • a housing corporation building;
    • a housing society building; or
    • a provincially designated apartment building.

    The owner of an eligible building, land co-operative, or multi-dwelling leased parcel must pass on the benefit of the grant to each eligible occupant. Read: Multiple Home Owner Grant.

  7. Retroactive Home Owner Grant – For qualifying home owners, a retroactive grant may be approved for the previous year only. Home owners must:
    • apply in writing for an extension on or after January 1 and before December 31 in the year following the year the owner didn’t apply for the grant; and
    • complete an application form with documentation supporting residency and providing reasons for missing the deadline.

    The municipal tax collector, or in rural areas the Surveyor of Taxes, will forward the application to the Home Owner Grant Administration Office. If approved the HOG Administration Office will pay the grant. Complete this application to apply.

    Claim the Home Owner Grant

    Property owners eligible for the Home Owner Grant must:

    • complete the application on the bottom of the property tax notice or online through the municipality’s Electronic Home Owner Grant (eHOG) service (where available).
    • sign it; and
    • return it to the local municipality by the close of business on the tax payment deadline day.

    If a property owner doesn’t claim the Home Owner Grant or incorrectly completes the application or fails to claim the grant, the owner will pay a penalty, typically 5%, on the outstanding property tax balance. If there’s still a balance owing on January 1 of 2018, daily interest may also be charged.

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    How to pay property taxes

    Check the due date on your tax notice, complete the Home Owner Grant application, and then pay by:

    • mail (must be received by the due date);
    • at a financial institution;
    • at city hall in person or use the city hall drop box;
    • through a mortgage;
    • by installments through the municipality;
    • online at www.epost.ca (for municipalities subscribing to this service); or
    • by using the municipality’s own online payment system, if one is available.

    Each municipality may have several ways to pay. Check with the property tax department to determine which is the most convenient for you. Make sure to understand the terms and conditions for each method.

    No credit card payments

    Municipalities don’t take credit card payments for property tax and utility payments due to significant service charges from credit card companies.

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    Deferring taxes

    Property owners may be eligible to defer taxes under the BC Property Tax Deferment Program, a low-interest loan program that lets qualifying property owners defer part, or all, of their property taxes on their principal residence.

    There are two programs:

    1. Regular deferment for property owners age 55 and older, surviving spouses, or persons with a disability.
    2. Families with children deferment program.

    A home owner with a mortgage can defer property taxes but must maintain a minimum of 25% equity in the property. All charges registered against the property (outstanding mortgage, credit lines) plus the deferred property tax can’t amount to more than 75% of the assessed value.

    The property owner must have current fire insurance on the home and all other buildings, otherwise equity will be based on the assessed value of the land only.

    The Province will not accept deferment applications for properties on leased land.

    Visit the BC Ministry of Finance Defer Your Taxes website for details.

    Questions? Contact Harriet Permut, Manager of Government Relations at hpermut@rebgv.org

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    For more information, please contact: Gino Pezzani.

Canadian Manufacturing Sales – February, 2018

Canadian manufacturing sales ended 2017 on a down note, declining 0.3 per cent on a monthly basis after a nearly 4 per cent increase in November. The decline was the result of lower sales in the energy sector as well as declining sales in food manufacturing. Sales were down in 11 of 21 manufacturing sub-sectors, representing 57 per cent of the manufacturing sector. On a year-over-year basis, Canadian manufacturing sales were up 3.7 per cent over December 2016.

In BC, manufacturing sales dipped 0.7 per cent on a monthly basis but were up close to 9 per cent year-over-year. For all of 2017, BC manufacturing sales rose 8.1 per cent with significant contributions from a diverse array of industries, most notably the the forestry sector where sales of paper and wood products were up more than 9 per cent on an annual basis. Those gains helped drive employment and housing demand around the province as BC posted another stellar year of economic growth.

For more information, please contact: Gino Pezzani.

BC Home Sales Dip After Strong December

Vancouver, BC – February, 2018. The British Columbia Real Estate Association (BCREA) reports that a total of 5,306 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in January, an increase of 18.3 per cent from the same period last year. The average MLS® residential price in BC was $721,477, up 16.2 per cent from the previous year. Total sales dollar volume was $3.83 billion, a 37.4 per cent increase from January 2017.

“BC home sales dipped 10 per cent from December to January, on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “New mortgage rules requiring conventional borrowers to qualify at a higher interest rate likely contributed to the decline in home sales last month. The impact was magnified by a strong December as many households advanced their purchase decisions ahead of the policy’s implementation.”

Despite the decline in January transactions, the seasonally adjusted annual rate of home sales was 101,800 units.

Compared to January 2017, market conditions tightened in all BC board areas except Victoria, where the sales-to-active listings ratio declined from 46.3 per cent to 40.5 per cent. Despite this decline, Victoria remains in strong sellers’ market territory. Total active listings in the province were down 8.6 per cent to 20,901 units, compared to the same period last year.

For more information, please contact: Gino Pezzani.

How to Stop Spending Money on Rent and Own a Home Instead

If you’ve always rented a place to live, buying a home can seem like a monumental undertaking. This report breaks down this home buying process into clear steps.

Seven Steps to Transition from Renter to Homeowner

Step One: Identify Your Needs and Wants   Begin your search by considering the kind of home you need and want. Write down your specific requirements, such as the number of bedrooms, size of yard, floor plan, location, schools, etc.

Step Two: Determine How Much You Can Realistically Afford  Consider your budget and financial obligations. Decide what monthly house payment you can really afford. Most mortgage consultants advise limiting your payment to no more than one-third of your net monthly income. If you’re unsure, contact your mortgage consultant to assist with the calculations.

Step Three: Get Pre-Approved By a Mortgage Consultant  When you know in advance the amount of loan you can obtain, you can focus on searching for houses in your targeted price range. This can save you time when you find that perfect home, because sellers favor buyers who are pre-approved.

Experienced mortgage consultants can let you know what specific loan programs are best for you. By taking a look at your financial situation and credit history, a mortgage consultant will tell you if you can qualify for the home you want and will find a loan that best suits your needs.

For the approval process, you and your mortgage consultant will complete the required documentation and submit it to an underwriter. A pre-approval is an actual loan commitment from a mortgage consultant or lending institution. This means that you definitely qualify for a loan. Talk to your mortgage consultant about the costs and time involved to secure pre- approval.

Step Four: Work With an Experienced Real Estate Consultant  You can learn a lot about consultants by talking to them about their experience. In a short time, you’ll be able to determine if they’re the right person to meet your needs.

Questions for Agents:

  1. In what areas of town and price ranges do you specialize? (Keep in mind that some agents specialize in only one area or one price range.)
  2. My objective is to buy a house by ___________. How will you help me achieve this goal?
  3. How often will you update me with new property listings?

Step Five: Tips for Successful House Hunting

  1. Keep an organized record of your research. Write down comments about the homes you see. Keep track of your likes and dislikes and offer feedback to your real estate consultant. Some buyers are reluctant to tell an agent what they really think of a house; they think the agent might take it personally.       Remember, the homes don’t belong to the agent!
  2. Make sure your agent is aware of your time schedule and expectations. Do you like to look at one or two homes per session? Four? Eight? Discuss this with your agent.
  3. Tell your agent about any homes you see that interest you and that you’d like to know more about. This includes homes you’ve “discovered” as you explore the area and those advertised in the newspaper and on the Internet.
  4. If you like to spend time driving around by yourself looking at houses, ask your agent for a list of drive-bys – homes to consider first from the outside. Your agent can make appointments to show you the interior of the properties that appeal to you.
  5. It’s important to know beforehand whom your agent represents. Some agents work only for the seller.

Step Six: Make a Purchase Offer  Work with your real estate consultant to determine the most appropriate purchase offer. Your consultant will present the offer on your behalf.

Step Seven: Save on Your Initial Investment and Monthly Payments  There are only two major investments to consider when buying a home. These are the initial investment, which includes the down payment and closing costs, and the monthly payment, which includes principal, interest, taxes and insurance. Here are some things to consider.

Initial Investment

  1. Choose a low or zero down payment loan. You don’t necessarily have to put 20 percent or even 10 percent down. You can pay 5 percent, 3 percent, or even zero down on some loans.
  2. Some Lenders have programs to cover your closing costs. Ask your mortgage consultant about them.
  3. As part of your offer, ask your real estate consultant about the seller’s paying some of your closing costs.
  4. Shop around for your homeowners’ insurance. A little comparison shopping can save you money.
  5. You may be able to deduct money paid for discount points from your gross income before computing your tax. See a CPA for more information.

Monthly Payments

  1. Get a loan that doesn’t have monthly mortgage insurance premiums. You may be able to reduce or eliminate them by paying a little more at closing. By putting 20 percent or more down, you can eliminate them entirely. Talk to your mortgage consultant about other ways to eliminate monthly mortgage insurance payments.
  2. Take advantage of rate lock programs that are currently available. You can generally lock in a low interest rate 30 to 45 days in advance. Secure an appraisal before you lock in a rate.
  3. Remember that interest payments on a primary residential mortgage are fully deductible. Your property taxes are also deductible. Tax rates definitely favor homeowners. Be sure to declare both your mortgage interest and property taxes when you file your income tax returns.
  4. Consider an adjustable rate mortgage. Adjustable rate mortgages (or ARMs) can be as much as 3 percent lower than fixed rates. Only choose this option when you’re in a position to refinance, should the adjustable rate rise sharply.

The Impact of the BC HOME Partnership Program on Metro Vancouver Home Prices

Read BCREA’s latest BCREA Market Intelligence Report: BCREA Market Intelligence Report: The Impact of the BC Home Partnership Program on Metro Vancouver Home Prices.

Download (PDF, 950KB)

It Is Time to Listen With Our Heart

One morning while spreading hay, a farmer noticed he’d lost his gold watch somewhere in the family’s big barn. The watch was a special Valentine’s Day gift given to him by his sweetheart exactly 25 years earlier. They didn’t have a lot of money back then. Not only was the watch valuable, it was precious because of the inscription which read, “Our love will only get better with time.”

He spent the next hour and half on his hands and knees scouring the barn and becoming increasingly anxious. Having a large family with lots of kids meant Valentine’s Day meals at fancy restaurants were a ritual from days gone by. Valentine’s Day dinner for 15 people including 8 grandchildren would be served in a few hours. The farmer did not want his wife to notice the missing watch.

He called the grandchildren, playing near the barn, over to his side. He promised a reward to whomever found the watch. The children got inside the barn and started searching everywhere. They went through, around, under, up and over every pile of hay but no luck. They could not find the watch.

The farmer gathered all the grandkids and called off the search. All the kids returned to playing and feeding goats, all but his smallest grandson who asked to be given one more chance to look. The farmer granted his request and smiled almost involuntarily as the boy turned and went back into the barn.
After 20 minutes, the little boy came running out holding the watch in his hand! The farmer was surprised, and asked the boy how he found the watch when the rest of them had failed.

The boy said, “All I did was sit quietly on the ground and listen. After a while, in the silence, I heard the ticking of your watch, so I just looked for it in that direction.”

Remember Valentine’s Day can be found in the direction of gold watches and fancy restaurants, or by being still and appreciating all the love around you.

Happy Valentine’s Day!

Video Update for Vancouver Housing Market for January 2018