Goodbye out of towners: back to (almost) normal
Back in 2016 everyone was a little surprised at the absolute explosion in prices in Victoria. I’d been talking about the gradual improvement in the market for a couple years, but still the ferocity of the uptick was more than anyone expected.
Part of the reason for the buyer frenzy was a return to reasonable affordability levels in the market, but it wasn’t really clear to me until later that the other reason was a flood of buyers from the lower mainland. In fact, in the peak buying season of 2016 the number of buyers from Vancouver quadrupled from the levels we had seen in the years before.
After 2016 the board changed the database to make this field no longer searchable so I cannot update the above graph with monthly data anymore, but I do have the annual totals that the board puts out which are below.
As it turns out, that ended up being the year of peak Vancouver buying, but levels were still elevated a year later. Part of the reason was that in 2016 the price premium for Vancouver houses really exploded and they were selling like hotcakes, so the prospect of cashing out in Vancouver and retiring or semi-retiring here become very attractive.
That differential is still high today, but the difference is that the Vancouver detached market is abysmal, and prices are melting rapidly. Although Vancouver owners can still cash out, buy here, and pocket a fat wad of cash, it is human nature to loathe selling into a declining market. Appropriately, the number of Vancouver buyers in 2018 dropped significantly, down 40% from the 2016 high water mark.
Fourth quarter data from 2018 indicates that Vancouver buyers may have dropped even further to the levels we saw in 2014 and before so this will be one to watch this year. Adding up all out of town buyers as a percentage, we can see that the ratio is back down to where we were 5 years ago.
Victoria will always be a destination city for out of town buyers, but it appears that our little blip might be over, and we are back to relatively normal levels of out of town buying with potentially more of a decline to come.
Ha ha……One thing I have found is that positive thinking people attract positive thinking people and negative thinking people attract negative thinking people. The positive thinking people find doors opening to them and negative thinking people find doors closing in front of them. It is so exciting to work with young people who are enthusiastic and to see them grab at opportunities that present themselves.
Victoria and outer area is a city filled with opportunities for people who are old, ( like me:) and also for those who are fresh out of school.
I guarantee you the area will continue to grow and attract people. It’s quite exciting really. It’s a great place to invest ones time, money and energy.
some says port hardy is the best place in the world .. full of life and nature .. some say Vancouver is like a farm land .. lack of things to do and very low in density – use to had friends visiting form NYC ten years ago .. .. that is how they described Vancouver – a farmland in the suburbs .. and i am sure Victoria has another 2 decades to go to catch up to Vancouver from a decade ago
ks112, I
get the difference. Thanks!
I came from Toronto to Victoria and I spend a lot of time up island in a community of 4k people. I am the happiest there. It really is about the person and maybe whether you are introvert or extrovert and what stage of life you are at.
Grace,
what we are talking about is vice versa from your situation. I think a person whom is used to Victoria will probably find Qualicum quite boring.
Given the price point of Victoria cost of living, the people whom do retire here usually are fairly financially well off. They most likely made their money in a much larger city and will be used to luxuries and amenities that are simply not available here in Victoria.
After Qualicum if I ever say I am bored in Victoria my husband has permission to divorce me.
Deryk I’d say your “boredom” comment is, at least partially, unfounded. After going to University with many students from Vancouver guess where the majority of them went back to after grad? People from bigger cities find Victoria too small and not enough to do. Plus being stuck on an island with the terrible ferries as the main way out is a big negative for people. I come from a small city on the island so for me Victoria is the perfect size. But many people who are accustomed to Calgary or Vancouver miss the hustle and bustle of the major metropolitans. Not everyone sees Victoria through the rose color glasses many of us Victoria wear. I used to work on a rig with a bunch of saskatchewan boys and guess what – they loved SK. They thought where they lived on their farms in the north was the most beautiful part of Canada. You couldn’t pay me to live in those parts and I couldnt’ pay them to move from them farms to Victoria. As they say, beauty is in the eye of the beholder.
Deryk
You lost me at reasonable
Although I am sure 30 years ago you could get a place here – relatively speaking – for a song
10 years ago maybe
This is mostly true. But it is also true that if you are miserable in Moose Jaw, you will be miserable in Victoria. Geography is NOT a major determinant of happiness.
I always get a chuckle out of people who suggest that they could get “bored” living in a beautiful city like Victoria. I’ve lived here as an artist for thirty years and it’s reasonable housing costs have allowed me to pursue my art and mount one man exhibitions in the former Soviet Union, Scotland, Iraq, the United States and Canada. I’ve had the personal support of Dr. Noam Chomsky, Yo Yo Ma and Vanessa Redgrave. Life can be as rich or as simple as you want to make it. For those who are bored in Victoria, there is no point in leaving because I suspect that “boredom” will follow you wherever you go.
It’s not the city.
@ Patrick
I am simply summarizing by what’s been said here and it goes as follows:
Bulls – Everyone in Canada wants to move to Victoria for retirement, so always will be crazy demand for homes here.
Facts – Most out of towner Canadians that buy homes in Victoria are from Alberta and Vancouver.
I just think the folks that live here are a little biased about how attractive Victoria really is. Victoria is great don’t get me wrong, but I can definitely see someone who’s used to a big city get instantly bored retiring here. I have been lucky enough and travelled to quite a few metropolitan city in the world and man just the lack of good dining choices alone in Victoria will prob make lots of folks think twice. For example, to get proper omakase sushi or any premium grade/cuts of steak you would need to travel to Vancouver.
Most of the people I have come across from larger cities loves visiting Victoria but would never live here permanently. But who knows maybe they’ll just buy a home here and leave it vacant for most of the year.
Patriotz-
Nah you totally missed the point. When the market is hot, with a great many sales, it means there is a sense of competition among buyers. All it takes is losing one bidding war or taking too long to decide on a desirable place to spark this, particularly among first time buyers. Also, low MOI means there really are fewer listings per buyer.
When these are reversed (high MOI, few sales) the opposite is true – buyers can (and do) take their time and there are many listings to see Per buyer. These factors are at play regardless of the price. Yes, undercutting everyone else with a bargain price will always help, but that’s not a very interesting observation.
It’s nothing to really jump on. Van and AB are simply close and not that far from family etc. Problem for a lot of Albertans are the trees and the hippies…
It isn’t really. What happens in falling markets is that sellers are less willing to list at or accept the current market price. That doesn’t really mean it’s harder to sell, just that sellers won’t get real.
Dementia village coming to Vancouver Island
https://www.cbc.ca/news/canada/british-columbia/comox-dementia-village-1.4984906
wonder if they will make something like this in Greater victoria area.. sannich farm land area will be great- low cost and close to town.. this will definitely increase good paying jobs too
i hope so too .. hopefully population rise fast enough that they can build a bridge to VAN… i dont want to spent 2 days of travel time to visit my folks… chances are slim .. but there are chances
Victoria’s population already rises faster than the national average. Number of retirees per year in Canada is rising per year too, from 300k per year now to 400k per year in 5 years.
https://vancouverisland.ctvnews.ca/mobile/census-population-of-metropolitan-area-of-victoria-outpaced-national-growth-rate-1.3278184
And let’s see what happens to our population now that we are building 5,000 units/year instead of 2,000. Either vacancies rise, population rises and/or density per unit decreases. All of those might occur, but I’m betting mainly on population rising faster than we’ve seen in recent years. If true, that will be great for the economy.
there is another way to look at that stats – local seniors can’t afford to, move out – local younger adults cant afford to stay – people in their 40’s can’t afford to have kids…
but i agree with you .. Victoria still has one of the highest retirement aged people
i wonder if Victoria will still be retirement hot spots in the next few years .. from the data LeoS pulled .. the last two years since price run up, people moving to Victoria has diminished
Victoria senior population at 21.1% is near the highest in Canada for any city. And that % is rising. Kelowna and Niagara are another Canadian retirement hot spots.
https://www150.statcan.gc.ca/n1/daily-quotidien/170503/cg-a006-eng.htm
For comparison, Calgary is 11%, Saskatoon 12%, Toronto 14.5%., Vancouver 15%.
About 20k Albertans come to BC each year. About 15K ontarians come to BC each year. A slightly smaller number go in the other direction.
Ok so with all the comments on the issue then I guess it’s safe to say that the argument bulls make about how Victoria is THE place for retirement is false. It’s mainly the Albertans that want to come. Vancouverites will come only if a significant arbitrage opportunity exists.
I see Steve Saretsky used the idea from this post in his new monday report – he even linked one of ur charts – too bad he didn’t note the source in his report – just used the picture as a link which I think is a bit crappy. But better than nothing I suppose.
I’m late to the discussion here but can’t help but feel that something is missing, namely, the ease of selling.
Back in 2016, it was a cinch to sell a Vancouver property – places were routinely going for hundreds of k’s over asking within a week or less. We know that is far from the case now, with multi-decade lows in sales and sold prices generally below asking. So cashing out to move here, regardless of price differential, is suddenly much more uncertain. It’s one thing to plan a move when it’s easy and risk-free, quite another when it might take 4months to get a below-ask offer.
China has recruited the services of former police detectives in Australia and other Western countries to help it recover millions of dollars in alleged “hot money” taken out of the country.
https://www.abc.net.au/news/2019-02-18/chinas-attempts-to-reclaim-money-from-inside-australia/10806228?pfmredir=sm
KS 112 A lot less people from Toronto partially because it is too far from family and friends unlike Vancouver.Retired Torontoans have a long tradition of snowbirding south.
We have better winters than Toronto but the winters are still cold, grey and rainy.
@leo s
What about the people from Toronto? They are not cashing in their homes and buying here like the Vancouver folks?
well .. i am only a simple human and took interest in what i can see .. most of the time, i only noticed albertan licences plates and vancouver license frames .. sure .. every once a while i seen a Saskatchewan plate .. but frequency of other license plates appearing is relatively low
Perhaps it is. Problem is finding the cash.
@ Dasmo
Well in that case then I guess the narrative of Victoria is appealing to all Canadians should be modified to Victoria mostly appeals to Vancouver and Alberta residents.
Since it has been more or less established that “Sarah” doesn’t exist, at least not as described, that’s not such a hardhearted viewpoint.
Because the bulk come from Van and AB.
Whats the fascination with only Vancouver and Alberta buyers? Why not Saskatchewan, Manitoba or Ontario buyers? I thought Victoria is THE place where everyone in Canada wants to live?
If u want to capture how Victoria real estate doesn’t correlate to local incomes then u would want to cover as many external factors as possible.
hmm .. now i am also curious how many Vancouver buyers are here before 2014 .. wonder what is the norm level
Correlated but of course there is more to it than Albertan buyers. I do think the number of out of town buyers is extremely important. They have a disproportionate effect.
KS 112: Yes that is the point of retiring. I was responding to the post that stated that suggested that there must be tax fraud involved because a lot of people seemed to have more housing and basic living expenses than reported income.
How does the number of Alberta buyers track Victoria real estate prices?
The number of moves (thanks for the chart Leo) very closely tracks the ups and downs of Calgary house prices, e.g the peak in 2007.
https://housepriceindex.ca/#chart_compare=ab_calgary
Found some more data… Might be another post in here as I haven’t looked at all this data back to 2004 when collection started.
Barrister,
I am confused, isn’t the whole point of retirement where you stop working (this having an income) and live off of what pension and savings you have accumulated in your working life?
KS 112: I think they are living fine as well. That was not my point. My point is that their expenses are more than their income and that it has nothing to do with any type of tax fraud. It is also not that rare for retired people to be living off of saving.
oops .. on further research .. the number does make sense .. i was wrong on time line .. Crude oil prices crashed in 2014 and the stuipd gas price only bottomed out around 2016.. Hey LeoS.. sorry to bother you .. can you show a data of Albertan buyers before 2014?.. i am just wondering if we are back to the norm with Albertan migration
thanks LeoS
that was an eye opener.. i was expecting Albertan buyers to double from 2015 to 2016 .. but i was wrong and data does not lie …however, number of albertan buyers have significantly dropped below the oil crash… so .. time to blame the Vancouverites for the explosive prices … Glad to be part of the problem 🙂
You have a point that not all “taxable-income-less-than-spending” families are involved with income tax fraud.
But for this couple, with limited savings/income but still bought and live a nice house in expensive neighborhood after stop working? Call it “frugal manner” or not, it is really a personal choice that they chosen. Lots other people in similar situation probably wouldn’t do that …
Such a cruel thing to point out. She’ll have to make her Sunday mimosas with Prosecco now instead of Veuve. Do these lefties have no heart at all!? My faith in my fellow Canadians has been shattered. I’m leaving.
I’m not. It was clear IPP was a disaster from the start. Nothing in the report is news to anyone that has been paying attention. I said that 8% increase in 5 years is a decrease in real terms so it makes little sense for people to be upset about it. The NDP promise to freeze hydro rates was exactly the kind of political interference in BC Hydro that they are now feigning outrage about.
Flat from 1990 to 2006, rising since then. What we don’t know is how many Vancouver buyers there were in that period since I have no data. Could be that even the number of buyers in 2014 were elevated. Over this time the demographics also have a large effect since not as many people were in a position to retire in Vancouver even with the house windfall.
I think the idea is that it was safer to keep it in Vancouver real estate since no one was paying attention to that. Fewer people paying attention there than in China or Mexico.
Things don’t add up here. Tax is 0.5% in the first year. Her townhouse is worth $2M?
I don’t think she is the intended target, however your description of her as alternately very successful (worked hard, reached a high level in her field, got a lucrative offer in Europe) and poor (lived frugally, never had a car, hard time coming up with $20,000) makes me think your story is driven by an agenda.
2014: 411
2015: 458
2016:453
2017: 309
2018: 232
Barrister, they have the house paid for and has 40k a year on top of OAS and and CPP, I think they are living just fine.
As for as deposit protection, I believe any BC credit union has unlimited protection for your deposit, not like a schedule A bank where u are only protected to 100k
Strangertimes: The solution is to just tax worldwide income like the Americans do whether or not you are resident in Canada.
Tax fraud is a problem but having said that I know of a fair number of retired people in Victoria (virtually all of whom dont have a mortgage) whose sixpences exceed their income. Basically they are living off their pension combined with dipping into their savings every year. It is why there is a whole industry of reverse mortgages out there.
I was helping out a new neighbour who recently retired and moved here from Toronto with some pretty simple banking arrangements (none of which involved tax minimization but rather was focused on making sure that their savings were couvered by deposit insurance which is another stupid story on its own). I am not sure that their situation is atypical of a significant segment of the population.
He is 67 and she is 64. After selling their house in Toronto they bought a house here for cash and had just under a million total in cash including their RRSP’s. Like many people who dont work for the government neither had a pension, other than CPP, To make a long story short they plan on burning through about 40k a year of capital, plus CPP by living in a frugal manner. They figure this should be able to carry them through their late eighties but if they are short they will reverse mortgage the house. The capital in their house is ear marked to pay for their move eventually into a nursing home.
My point is that their income would definitely show up as a lot less than their expenses and if your major source of income is CPP plus the 2.5% the banks pay on term deposits on a ever dwindling capital base than you will show up as pretty close to the poverty line in spite of owning a nice home.
I am not saying that tax fraud is not a problem because it is a problem but rather that there is less of it than might first appear. There are solutions to satellite families but they are more complex than many people think and would involved major changes in our tax act including taxing world wide income and making any form of support payments taxable in the recipients hands. This would involve some serious consequences on many levels.
Not bringing rich immigrants with families to dump here through the Quebec program might also be a great start but then you can listen to the screams from La Belle Province.
I hate being woken up with the middle of the night phone calls but such is life.
But the original poster said “Sarah” had obtained non-resident tax status. That’s the first red flag. CRA says that retaining a home in Canada is a significant residential tie which disqualifies non-resident status. The second red flag is the mother “Sarah” supposedly had to visit, which has nothing to do with the tax situation and seems to have been inserted as a tear jerker.
I think any informed person who is actually in such a situation would just continue filing as a Canadian resident and claim FTC, and keep principal residence status on the property, as you have suggested.
I think it’s most likely OP had contrived a situation where a returning home owner would be subject to the spec tax, and didn’t see the internal contradictions.
so you are just trying to go though the loop holes to avoid paying taxes that builds the infrastructure of this city?
Patrick- I think you are underestimating how large of a problem tax evasion is and the impact it has had on the housing crisis especially in Vancouver which impacts us. You can’t get average home prices in Metro Vancouver of 1.6 million with very low average incomes without massive amounts of fraud, money laundering and speculation.
“Something is clearly rotten in Metro Vancouver’s property market. Household incomes reported to the Canada Revenue Agency in Metro Vancouver’s swankiest neighbourhoods are equivalent to incomes reported in the deeply impoverished Downtown Eastside. The disconnect between declared income and apparent housing wealth persists across Metro Vancouver “until you get out to the distant suburbs,” Eby says.
Two years ago, when the average detached home price within Metro Vancouver had soared to $1.4 million, the South China Morning Post crunched some numbers tallied up by the mathematician Jens von Bergmann at the Vancouver data firm MountainMath Software. What the data showed was that one in 10 Vancouver households were reporting a household income that was less than the amount required just for property taxes, mortgage payments, utilities and so on. That’s 24,960 households claiming to earn less in a year than they were spending on accommodation.”
https://www.macleans.ca/news/canada/the-battle-to-clean-up-b-c/
“A reason why residents of Metro Vancouver municipalities with expensive housing tend to report lower incomes than people in less-costly municipalities is that many of the former avoid declaring their total wealth, said Wozny, whose company has produced 1,200 studies on real-estate trends in Canada and the U.S.
“Canada has become a freeloader society” in which some mansion owners have found ways to avoid reporting their total incomes to the Canada Revenue Agency, said Wozny
Census figures released this week show Metro Vancouver, which has one of the world’s most expensive housing markets, lags behind 14 other Canadian cities on average wages.
The census also exposed an apparent contradiction: Residents of Richmond, Burnaby, the city of Vancouver and West Vancouver — which have the most expensive housing costs in Metro — also claim on average the highest rates of poverty.
The census data highlights “inappropriate reporting of family incomes” by many property owners in Metro Vancouver’s well-off neighbourhoods, says Wozny, head of Site Economics Ltd., who said governments need to crack down on residential property speculators.’
https://vancouversun.com/opinion/columnists/douglas-todd-tax-avoidance-behind-metros-disconnect-between-housing-income
Where would we be without Sarah to talk about? We’d be forced to examine the weather in our garden paradise.
To draw a line under it:
– if she did not rent the house out while she was gone CRA will emphatically declare she never became a non-resident and will want full payment of tax and late penalties for her earnings outside Canada in the intervening years.
-if she did rent the house out but now returns to it she will be assessed tax-owing on the increase in value while she was away, but this is at the very favorable (for Canada) capital gains rate.
-she does NOT have to pay the tax until she sells the house on or she herself expires.
I’ve done this dance three times so have a passing familiarity with the moves.
Thanks for the link. The radio interview with the professor was “interesting.”
He mostly talked about satellite families, and how identifying them will somehow make the foreign parents end up paying hundreds of millions of dollars of taxes in Canada. IMO, it is more likely that, going forward, satellite families will just rent properties instead of owning them, occupying the same number of houses but avoiding all spec tax, and related tax inquisition that seems to interest the professor. Most of these satellite families are not “nefarious”, they are simply a parent buying a condo for a kid going to university. So now the parents will rent a condo for the kid, or just send the kid to university elsewhere. Not something to cheer about IMO.
Absent was much talk from the professor about if the tax would be effective at improving affordability, either by changing behavior or raising tax money for affordable housing. Those are the two objectives mentioned by the govt.
Yes, in a discussion about capital gains my accountant mentioned that we could theoretically move out of our house and rent it for up to four years without losing the primary residence exemption.
Hi freedom, that is not our rental but it looks very nice and not a bad rent. We are renting a condo.
Once sorry to see you go and hope things get sorted. Victoria is very left so their reaction to your story is not surprising unfortunately.
Patriot: I put a call in to a Toronto tax lawyer to double check but after looking at a number of tax cases I believe that multiple homes whether you call them a cottage or otherwise are all considered under the category of personal use. Because Sarah did not rent out the property and continued to sporadically use it for her personal use I suspect that there was no deemed disposition. But for the years away this was not her personal residence.
Hi Grace,
If this is your rental, the owner (my friend) should be happy -;).
https://www.usedvictoria.com/classified-ad/VictoriaOak-Bay-Border_29315874
AGREE.. in the end .. they also appeasing to majority voters .. chances are .. most BC residence dont have multiple properties. Even if it pissed off a few wealthy british Colombians … then so be it .. since millennial votes becomes more and more significant ..most people in bc (80% stated in the interview) support a type of tax to stop speculation.. imaging.. a boomer with a property and 3 aldult childrens .. non of them can buy.. tax does not affect them … what would the boomers do?
I am not an expert, but have worked in a tax firm, also had past experience dealing with CRA wrt capital gain reporting/handling on our own rental/principal residence.
In Sarah’s case, although she moved away for work, if she could consider herself as deemed resident due to her close ties to Canada and continue to pay income tax (world wise income) in Canada while she was away, then she could keep her townhome as principal residence for up to four (or more in some special cases) years, regardless she rented it out or not. If so, there would be no capital gain when she sell it.
If she considered herself as deemed non-resident after she moved away for work and paid income tax elsewhere, then her house here wouldn’t be her principal residence anymore when she was away (regardless if the house is rented or not). She would need to report the gain for that absent period, and pay capital gain when she sell the house. CRA would normally like realtor’s assessments for house market value at both times -when she moved away and when she came back – to determine the gain.
Of course, to have agreement with another (e.g. tax treaty) country where you work to pay income tax in Canada is another matter. But if Sarah could, she might have saved more on capital gain (+spec tax) than income tax.
For anyone in that situation, it is a very good idea to consult a tax expert before leaving, probably even more important than when coming back.
If this polite little blog destroys your faith in humanity then for your own good stay off of Facebook and Twitter
This source disagrees. I am not in the business of giving advice but they are. As I don’t own a cottage I will leave it at that.
“It’s this last bit that applies to you. According to the CRA a deemed disposition is a change of use in a property. In your case, you changed the use of your vacation property (to your primary residence) after you sold your home and moved in to the vacation property 14 years ago.
From a tax perspective, you owe tax on any price appreciation in the first 14 years you owned the property. However, for the remaining 14 years—when you lived in the property as your principal residence—any appreciation in value is exempt from capital gains tax.”
Capital gains tax: Declaring the cottage ‘principal residence’
Great radio interview in the link below with a professor from the School of Public Policy that gets back to an important component of the spec tax. Identifying people who are tax avoiding or evading. I do think the tax can be tweaked to include more exemptions for the unintended consequences we hear about. It is such a small percentage of cases that it would make no difference to the success of the tax anyhow. The problem is even if you do create more exemptions it wouldn’t do much to appease many of the people who oppose this tax. I completely agree with what he says at the end of this interview that this tax is getting pushback in the political realm and the press because it is going to have an important effect. Many of the people who don’t like this tax are developers and the real estate industry and they have allies and they are pushing those allies to oppose this. They want cities here to become resort towns and for the real estate party to continue.
http://www.iheartradio.ca/cfax-1070/could-the-spec-tax-be-a-good-thing-1.8699822
Where Patriotz is being gleefully wrong is that principal residence is not a use but an exemption.
Think of it this way, I own a cottage and a house. My house is my principal residence, Later I sell the house and move into the cottage which now becomes my principal residence. There is no deemed disposition of the cottage when I make it my principal resident and that is because the actual category is a a private residence (as opposed to a rental or income property. There is capital gain on either the cottage or the house when you sell it but there is an exemption from that capital gain if the property was your principal residence.
I think I am going to take a break from this forum. My faith in the fairness of my fellow Canadians has been pretty shaken. Have a good time, y’all.
No, as inreallove stated this isn’t the way it works. Plus, the only time it can be a deemed disposition is when she leaves the country, not when she comes back. In that case the resident Sarah would have been covered by the principal residence exemption anyway, and the nonresident Sarah gets to come back later with whatever assets she owns.
Statistics Canada says adults living with parents usually employed and single
https://nanaimonewsnow.com/article/608734/statistics-canada-says-adults-living-parents-are-employed-and-single
Lol great post Love. I pretty sure she will not have to pay the tax. After a phone call and some more info I am pretty sure she should be exempt.
For those that care, Sarah does not have a deemed disposition as it is Taxable Canadian Property which is not taxed on departure or immigration. Only a change in use, which did not occur. Likely a reason why she did not rent it. She likely got professional advice and did not rely on the internet housing blogs for advice.
I agree there. I wouldn’t have mentioned it if it hadn’t have come from the govt (according to times colonist article posted earlier ).
Agreed.
There sure is. But to get non-res status in the first place you have to convince CRA that you are leaving the country more or less permanently (i.e. without residential or other ties). It doesn’t happen just because you leave the country.
At this point I have to wonder if this is a real story or at least if some significant facts are not related correctly.
Total households 1.6m sounds right given the average household size. However the number of residential properties must be less. BC Assessment says there are 2,067,479 * .88 = 1,819,381 residential properties in the province, which has a population of 5 million. As well, the spec tax cities have more dwellings per property.
Don’t know just who screwed up the number but 1.6 mil properties subject to the tax doesn’t make sense. (sorry for the duplicate, I could no longer edit the original).
Look on the bright side, that will get her out of paying the spec tax next year. 🙂
What baffles me is why someone going to work in Europe would want to become non-res in the first place. It only gets you ahead if you’re working somewhere with low or no taxes like Dubai, etc. Income tax in Europe is just as high as here, usually higher, and if you retain Canadian tax residency you can just claim a foreign tax credit for what you paid over there.
Total households 1.6m sounds right given the average household size. However the number of residential properties must be far less. There are only 2 million properties (all classes) in the whole province.
Don’t know just who screwed up the number but 1.6 mil properties subject to the tax doesn’t make sense.
Good points.
There’s also a question as to whether someone who leaves Canada temporarily but still owns and has access to a Canadian property with possessions in it ever ceased to be a tax resident of Canada in the first place.
I agree with your earlier good suggestion for anyone in this situation to contact a professional.
Once and Future, your friend Sarah will be paying the SpecTax of roughly $5,000 but that’s nothing compared to the Capital Gains Tax she must pay in April 2019.
As already mentioned by others, Sarah’s townhouse was not her principal residence for the four years she was in Europe but it became her principal resistance when she moved back recently. That creates a ‘Deemed Dusposition’ under the Income Tax Act.
Any increase in her house value during her four years absence is immediately subject to capital gains when she returns to living in her townhouse. She must file a deemed disposition declaration when submitting her 2018 income tax forms. Her capital gains declaration will be for 100% of the increased value over the past four years, and 50% of that amount is subject to income tax. The tax rate will likely be about 40%.
So her capital gains tax bill will be roughly this:
Welcome back to Canada Sarah, here is your $65,000 tax bill that must be paid within two months.
Please tell Sarah that if she fails to declare the capital gains then she will also get a penalty assessment from CRA for thousands of dollars.
I’m not an accountant, I just know from personal experience. Tell Sarah she needs a good accountant ASAP to determine if she is eligible for any tax breaks.
I didn’t come up with the 1.6m number, that’s from the Ministry of Finance. (fwiw, Spec tax cities population is 3.5m, and the 1.6m households sounds right to me)
https://www.timescolonist.com/real-estate/backlash-builds-over-homeowner-speculation-tax-form-1.23602814
“The Ministry of Finance will send letters outlining how to apply for a speculation tax exemption to owners of homes in Greater Victoria, Nanaimo, Kelowna and Metro Vancouver, including Abbotsford, Mission and Chilliwack.
“****The ministry estimates 1.6 million households will receive the letter **** and about 32,000 homes will be taxed.”
“Homeowners must opt-out of the tax annually and those who mistakenly pay the tax can get a rebate within six years, the ministry said.”
Section 139 of the Act authorizes the L-G in Council (i.e. the cabinet) to make a wide variety of regulations, including “respecting exemptions from tax, including, without limitation, respecting limits or conditions on those exemptions;”
http://www.bclaws.ca/civix/document/id/complete/statreg/18046#section13
I’m not following the ongoing debate about the SpecTax because it doesn’t apply to me, but I’m curious about whether the rules are written specifically in the statute or are the rules in a regulation? Regulations are easy to change in a day or two, but the statute is difficult to change.
The NDP and the AG lawyers must have anticipated there would be unintended consequences so the logical place for the rules would be in the regulations, not written in stone in the statute.
BC Assessment says there are 529,730 assessed properties in Greater Vancouver. That’s all assessment classes – residential, commercial, etc. Given that GV accounts for the great majority of properties in the spec tax area, the number of properties required to declare must be less than 1 million and probably not much more than 500,000 or so.
CRA considers the property to have been sold by Sarah the non-resident to Sarah the resident. That’s called a deemed disposition and it happens any time you turn a property that wasn’t your principal residence into one, even if you’ve been living in Canada all along.
Good point. Discouraging speculators reduces liquidity and further cripples the housing market.
They compare BC to Australia, where coal power costs $.41/kwh. They neglect to mention that the cost in Australia is so high because of inept government and corruption, neither of which we are immune to.
Many of us “lost our minds” because the premier promised not to implement the HST and one month later he introduced it. For many BCers it was one lie too many, and a majority decided that a more flawed tax was preferable to rewarding a mendacious premier.
I was excited to hear about the Liberian living in Oak Bay, but then disappointed when I realized it was merely a typo.
Jamal, post 56460, there is the affordability chart. Now I know everyone will focus on the house price differences but take a quick look at the median income difference between Victoria and Calgary. Look at the 25 to 34 column where most first time buyers would be.
Leaving aside all the reasons, like retirees, as to why houses prices are higher here, the other side of the coin is that we have an income problem here. We have a lot of government jobs, we have a lot of low paying jobs in tourism and according to some we have a growing “tech” sector. I have to wonder if Victoria consumes a lot more than it produces.
Unintended consequences are always interesting to contemplate, but it’s almost always in hindsight. Is it possible that real estate speculators prevent serious price corrections. The SpecTax consequences might answer that question.
The SpecTax/EmptyHouse taxation might provide some interesting unintended consequences in a couple years. Real Estate Speculators, house hoarders, property investors have been demonized for buying up houses and then underutilizing them. That clearly creates a negative situation for people who want to buy during times when house prices are increasing.
But what about when house prices are declining? Is real estate speculation/empty-houses, during a house price downturn, still a negative situation?
It’s conceivable that during a house price downturn, the house speculators actually prevent rapid price declines and they might also limit the price decline percentage. As house prices gradually decrease, speculators slowly enter the market with lowball offers and effectively vacuum up the housing dregs, thus slowing down any price declines. They then often hold without renting while they make plans for renovations, sometimes for well over 18 months.
During this downturn it is conceivable that the downturn will accelerate faster and the correction percentage will be higher, simply because speculators will be reluctant to jump back into the falling market by buying up the dregs due to the SpecTax.
In the past, rental vacancy rates tend to increase when house prices decline. Perhaps a SpecTax is only beneficial during years when property values increase at rates greater than inflation.
Sounds like 3% of people weren’t ready for the responsibility of home ownership. Since when are ignorance and neglect excuses for not taking care of your legal obligations? If I have to face the reality of current housing prices and am told to suck it up and rent or move, pretty sure the lucky people who won the lottery of home ownership before the run up can suck it up too. If you can’t manage it.. rent or move 🙂
I am neutral about income tax, but only because I don’t always believe the federal govt spends it wisely. Rates seem (mostly) fair to me.
I wish the PST was rolled back into HST for simplicity of administration. As a small business owner, HST was waaay smarter. Other than messing up the exemptions, I am not sure why the citizens of this province lost their minds over it.
PTT is a reasonable attempt to reduce froth in the property market. The first-time exemptions need adjusting, though.
I love the carbon tax. I wish I paid more at the pump. Seriously, the price of gas is too damn low.
Property tax I grudgingly accept. I like the fact that it directly supports my local community. It is the tax I am most likely to have a direct say in how it is spent.
I have said enough about the spectax for now.
Yes, but only for the gain that happened during the 4 years she was absent, and only when she sells it. Which is fair. She intends on it being in her estate, so that tax will not impact her retirement.
In City of Vancouver, 3% of people missed the Vancouver vacancy tax deadline this year. If those same numbers happen with the spec tax province wide, given the 1.6m letters that went out, that would be 48,000 people that didn’t “sort it out”, and get billed-by-default for spec tax, due to this “opt-out” NDP tax scheme. That could be a “train wreck”. And then the NDP govt can “sort it out”. First sign of this will be an extended deadline and ad campaign.
They can sort it out. It’s just a form… you act like this is the first time any Canadian has been mailed something by the government with expectations they respond. How do they even survive as an adult if they can’t figure something so simple out? Go to the library for a computer. Hire someone. Ask a friend.
Green Party leader Andrew Weaver speaking about the recent BC Hydro issue.
https://www.cbc.ca/news/canada/british-columbia/criticism-bc-hydro-report-rate-hikes-1.5021750
B.C. Green Party leader Andrew Weaver criticised the NDP for turning to a blame game rather than addressing larger environmental and energy management concerns.
“I’m a little tired, and I think most British Columbians are, of this government standing up and blaming the previous government for this, that and everything else,” Weaver said.
It looks to me like “Sarah” will be liable to pay capital gains tax on her 2018 return on the increase in market value of the house from the time she became a non-resident to the time she became a resident again. That’s called a “deemed disposition”. A non-resident of Canada tax wise cannot have a principal residence in Canada.
This rule has been around a long time and the tax hit will dwarf the spec tax. Can’t say she couldn’t see this coming. Anyone planning to move offshore and become a non-resident tax wise while retaining substantial Canadian assets should see professional advice.
You don’t need any more than usual. What you need is not enough buyers at the current price.
wonder how these numbers affects local condo markets
And what about 82 y.o. people who don’t use computers, or don’t have sons like you to help them, or haven’t even heard of the spec tax? But they’ve lived in BC their whole life, paying taxes and owing a principle residence. Are you OK with them, by default, be charged a vacancy/spec tax if they don’t file correctly by March 31, and let them fight to get a reversal?
Yes, but in the issue of affordable housing, isn’t it just as important to force a rental to avoid spec tax in Campbell River (sale price $400k) as it to force a rental to avoid spec tax in Shaughnessy (Vancouver), sale price $12m . The vacancy rate in Campbell River (0.4%) is lower than Vancouver (0.8%). Why is Campbell River exempt and Vancouver not exempt.
To be clear, I’m opposed to the spec tax, period (as are the majority of MLAs Libs and Greens). Just pointing out the inconsistencies. In the hope that people will realize what our MLAs have, namely “yes, the spec tax should be abolished”.
2.5 minutes to declare on my spec tax including 45 seconds rifling through stuff to find my SIN. So much dishonest scaremongering about how annoying and time-consuming the declaration would be.
Lots of news stories claiming this was going to take 20 minutes. No way! I figure it might take a total computer noob like my 82 y.o. mom maybe 10 minutes max
Of course it is. I personally hate income tax, PST, GST, PTT, carbon tax, spec tax, property tax etc.
But programs have to be paid for somehow.
Overall I support taxing property as it is a simple tax to apply and collect and nearly impossible to dodge.
Supporting a tax as sound policy to raise revenue or to discourage undesirable activities (carbon emissions, RE speculation) doesn’t mean you are motivated by envy or revenge.
I support progressive income taxes not because I feel envy to those making more than me or noblesse oblige towards those making less than me but because it is sound policy.
being affordable does not mean enjoyable … this also apply to Victoria when comparing to Vancouver
Much of the price pressure up island comes from people priced out of the major centres. Therefore applying the spec tax in just the major centres is likely to benefit housing availability in these peripheral regions.
Also let’s not forget that affordability is way better up island. Prices have gone up a lot but you can still easily get an SFH for under 400 K in CR.
Cycles exist, but lets not forget about the trend which has not been your friend if you are trying to get into real estate in Victoria.
Jerry
They have a couple of million dollars and had the opportunity of a lifetime and probably did some fine living when they were abroad – kinda tough to feel sorry for them
I mean they might of had to sell because they needed the money or they could have rented their houses out
But chose not to
Or they could of stayed in a not so rewarding job have significantly less in the bank, we’re never able to travel but be house rich – I mean they left for a reason and stayed out of Canada for a significant period – I mean if they came back five years ago they’d be laughing all the way to the bank
What about the suckers here who don’t have millions in the bank have a good job and can’t even get a decent starter home?
“It wouldn’t have been “silly” to sell her condo when she left the country”
Not silly, but monstrously and life-alteringly inept. A few decades back I had about a dozen colleagues who were presented with professional opportunities of a lifetime in another country. They all sold up in Vancouver and moved away. Now, 15 years later and despite being armed with several million dollars of savings for retirement they do not have the money to repurchase the very same homes they left behind.
I sent a few of them emails today with some cut and paste quotes from todays forum. It may blunt their regret a little to know that whatever else may occur, they have at least been saved from having Josh as a neighbor.
The two mees!
Congrats on the house sale by the way… that must be a load off.
How could she have avoided the tax, it didn’t exist so she didn’t know the rules. I guess I read way too much Asterix growing up. I find in near impossible to cheer on new taxes.
If anyone wants the names of two incredible realtors in the Parksville Qualicum area let me know. I will sing their praises to everyone.
And we can walk to the pub on Oak Bay Ave.so let me know if there is ever a meet up there.
Thanks again for the good wishes.
Ok Imwill let let you number/ stat guys get back to it!
In all fairness, presenting that argument to the forum in 2016 was likely the worst timing for you. Because Vic house prices rocketed straight up 40% from there (see teranet) , with no cycling. Perhaps a once-in-a-lifetime rise, that you missed because you thought people disputing you were not understanding and merely “mocking you”. Turns out, in 2016, wasn’t it simply a matter of “they were right and you were wrong” …no?
fwiw, I’ve been wrong close to 50% of the time on various market predictions, it’s no big deal.
Link: Teranet showing Victoria house price epic 40% rise from 150 to 210 from 2016 to now https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf
Hot take: from now on, Victoria is more or less always going to be in a housing crisis. I feel like in the last decade or so demand has reached some sort of critical mass that no amount of new construction can satiate.
You can try to regulate and tax the shit out of it (only ever briefly, while you’re in power), but that won’t change the fact that real estate is now an investment. And there’s no turning back the clock on that.
If you know that you’re only going to be abroad temporarily, selling is financially dumb.
Also, Sarah might be one of those (brighter than average?) people who understand that selling with the hope of re-buying later is a very risky play in a location like Victoria.
Doesn’t matter how cheap power gets when BC Hydro is locked into multidecade contracts to buy power at ridiculously expensive rates.
Also, it’s not 8% over 5 years that freaks me out; it’s that 8% over 5 years is way too low an increase given BC Hydro’s debt obligations. It’s just sweeping all its financial problems under the rug.
Leo, I like green electricity as much as you do, and there are lots of positive things about BC Hydro. But downplaying gross mismanagement and the wasting of tens of billions of dollars isn’t a good look on you.
It’s funny, Leo. I find you to be very level-headed and fair in your assessment of all manner of proposals, government policies, outcomes, etc. But BC Hydro really does seem to be a blindspot for you.
Grace that is fantastic on the rental and the location. Glad everything is working out…
Everybody likes you and was routing for you so coming out is a good thing. Right wingers like me have to hide to stay safe in Victoria. 🙂
Grace,
Two home runs in one day. Congrats!
Oh, how’d I enjoy that if that happened. It’s one of the reasons I find market psychology so bewildering and fascinating – that very concept of collective amnesia we all get every decade or so. I’m completely confident that leading up to the next cycle peak, housing here will be considered a super hot, bullet proof investment again.
And the “its failsafe” idea will become manifest whether the market here corrected 10% or 90% from this peak. As far I’ve ever been able to tell, it doesn’t make a shred of difference. The amnesia is essentially total; each time, it’s different this time.
Aww thanks guys. We did find a Rental! We boldly started renting it for March. It was too good to pass up. Nothing fancy but in Oak Bay border area and about 600.00 less than some other inferior places.
We are set.
Back to my beloved city for April 1. ( but I may do some camping in the suite).
Thanks for listening and offering advice. Mainly to be patient. Not my long suit as a chronic worrier.
And I want to come to a meet up and reveal my true identity.
YAY!
Congrats Grace. Hope you find a great rental in Victoria..
After all the ridiculous fuss over nothing the buyers came back with nothing changed from the original offer. We are officially SOLD.
I have a question on how things work
If I go on bc assessment and it says house was bought for 1 mill a year ago – if that house was new does that 1 mill include the gst?
Leo on the real estate portal if a new house says pended or sold at a million does that include the gst or would the gst be on top od that – or could the builder had absorbed the gst
The reason I ask is that we have bid on and did not get a house and when it sold it was close to what we were offering but we wanted the price to include gst – so when it sold for basically what we were offering a few months later – I am never sure that in the end it cost $30-50k more
Thanks in advance
I knew she had moved back. My point was that I don’t think she deserves an exemption and she had reasonable ways to avoid it – renting being the most obvious.
I got the gist and agree with it. If places were affordable, I would have just bought and may not have ever come to this blog. Policy debate flare-ups always happen during exasperating times. Personally, I hope we don’t get collective amnesia when the market turns and instead implement long-term policies that support the sentiment of houses being homes and not investments.
You seem to be very well paid for someone who doesn’t actually read. Go back and try again, Josh.
Either that or you have just decided to go 100% Troll on us.
Consistency is good. How about in application of the areas to include in the spec tax? There are municipalities with lower vacancy rates than Victoria, and unaffordability issues. Shouldn’t they be included in spec tax, and shouldn’t there be objective/transparent criteria for picking which cities get it or not. Should also be clear how you get out of it, because it would be inconsistent and counter-productive to maintain a spec-tax in a city with a high vacancy rate.
All these areas are spec tax free, yet have “severe unafforadbility” (according to CMHC) and low vacancy issues. Most of these have lower vacancy than Victoria (1.2% vacancy rate https://www.timescolonist.com/real-estate/greater-victoria-vacancy-rate-rises-slightly-as-rents-jump-7-5-per-cent-1.23512403 ).
https://www.mycampbellrivernow.com/29674/apartment-vacancy-rates-under-1-5-percent-across-north-island/
“Campbell River – 0.4 percent
City of Courtenay – 0.6 percent
Town of Comox – 1.1 percent
Powell River – 1.4 percent
The Courtenay CMA (which is the whole Courtenay-Comox Valley region) is 0.7 percent.
Meanwhile, according to the Canadian Rental Housing Index, the Comox Valley is considered “severely unaffordable” with 66 percent of household income spent on rent and utilities.
It’s more of the same with the Strathcona District, at 58 percent and Powell River, at 59 percent.”
Sorry made mistake on data.. used Vancouver numbers instead of greater Vic.. but that is 9/162k dwellings= 5.5%
You got a point, but I assume people who can’t sell in 2015 carries on to 2016 , 2016 into 2017.. also I assume the random rate of people who are force to sell due to retirement, devorce, job relocation remains constant regardless of RE cycles.. only speculators and flippers rate of house exchanges fluctuates.. and those people who speculates is probably a small number of local residents
@ Jamal,
I think the more interesting question would be how many forced sellers will be required in order to have a > ~7% correction annually? Because technically if you are not a forced seller then you don’t have to accept a lower price than what you have listed.
Last week I was having a conversation with a friend about RE. We were having the conversation about cycles, and it was funny.
He totally scoffed at the idea, and said everything except RE runs on a cycle. He was absolutely intransigent on that point. I just said, “Ah, okay,” and left it at that. Not much you can say, I suppose. Not worth straining a relationship over, haha.
I recall when I first started presenting the concept of cycles to this forum in 2016, I didn’t get the sense it got traction. The few people that did seem to respond generally mocked it, almost like I was Richard C Hoagland proclaiming General Relativity to be a fraud. Now when they talk about RE, it’s almost like cycles are something that’s self evident. Go figure.
If you read what I wrote and the spirit of its intent, you might see that “cheering the legal minimum” was not the point I was making. The point was more to do with what arguments and grievances tend to arise in overly hot, and overly cold, markets. I doesn’t analyze their moral validity, it just observes their transient and repetitive nature (given enough time). All the conversations about speculation taxes, rent controls, empty houses, foreign buyers – we’ve had it all before and you’ve seen this if you’ve seen some of the historical articles I’ve posted. Then eventually…people forget all about it when housing hits the downside. Seen a more intense a cycle this time? Then, all the more relevant the arguments might seem at that moment.
One more for the long weekend:
I wouldn’t. Property taxes get paid regardless of how a property is used. I’m never going to cheer the legal minimum and I don’t understand why others do. Seriously, why would anyone cheer the gracious contributions of the legal minimum?
My support for the spec tax isn’t conditional on anecdotal sob stories. It’s not cruel, it’s just consistent.
Jamal just remember 3% is what sold not what people r trying to sell – which is increasing monthly.
you assuming every one is a buyer and seller .. remember – majority of home owners already owned their house prior to 2019.. the meddling only affects the recent buyers and sellers .. so if you are a long bull .. it should not affect you at all
Data from VREB and Statcan 2016 shows that only around 9k homes out of the 283k homes we sold – that means it only 3% homes changed hands .. i dont think victoria will puke from 3% homes having hard time selling
https://www.vreb.org/media/attachments/view/doc/2016_annual_summaries_of_residential_sales_by_district/pdf/Sales%20By%20Property%20Type%20and%20District
https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/page.cfm?Lang=E&Geo1=CMACA&Code1=935&Geo2=CSD&Code2=5915022&Data=Count&SearchText=Vancouver&SearchType=Begins&SearchPR=01&B1=All&GeoLevel=PR&GeoCode=5915022&TABID=1
Gwac,
Agreed.
My “housing cycle” comment was mainly related to housing construction swinging from extremes of “too many” to “too few”, often due to mis-timed govt meddling. We could see this in Victoria if they keep making things worse (taxes, red tape, rent regulations) for developers.
House prices in Victoria swings have been mild as you say, and generally a one-way rise up, for good reasons. I’m not expecting a drop in Vic prices, but who knows?
Hey Leo do you have a longer van/Vic house price difference graph? Was the difference in change closer to flat the decade before?
Patrick some areas have bigger price movements in cycles. GTA/ Van high end. Victoria historically low end. If Victoria does not puke real soon with all the government meddling than I think we will have the same cycle here as in the past. Nothing for a few years than up. The problem with meddling is demand does not go away long term so the cycle next time up will be ugly.
@ gawc
Ok gotcha! But ya I agree with the advice Barrister gave, if homes here are too expensive for what you make @ your chosen occupation then there are several choices:
-Get a second job (legal)
-Get as many tenants/roommates as you possibly could (assume you have the down payment and can get financing)
-Get a second job (illegal)
-Find partner whom already has a home or has the means to purchase a home when combined with your income
-Pray for an unlikely >25% correction
-Move
KS he has mentioned in the past before you got here that he is looking to buy and thinks its too expensive here now.
Barrister was trying to convince him to move to Ontario (not Toronto) 🙂
@ gawc,
Lol how do we know Josh is a renter now ? I mean, if I had to bet then I would probably also bet that he is but I am wondering how you came up with that (other than his obvious disgust towards high home prices)?
As far as driving up housing costs in Victoria, I would say the hardworking FOMO folks that bought in the last 3 years had just as big of hand in it as the speculators…
@ local fool
I am waiting for the bulls to jump on you for mentioning the word “cycle” when referring to real estate 🙂 Oh wait, even Patrick has agreed to the concept of real estate cycles!!!
Great post!
Ireland had a terrible problem with too many (230k) vacant homes after the Celtic tiger collapsed. And now they have swung back to the biggest housing shortage in modern history https://www.google.ca/amp/s/amp.ft.com/content/ba41c19e-3478-11e6-ad39-3fee5ffe5b5b
“A decade ago, Ireland was building many more homes than its demographic trends warranted: 90,000 a year at the peak of its building boom in 2006. Now, through a mix of policy paralysis, a broken construction industry, a scarcity of development finance, and changing home-ownership and demographic trends, it is facing the most severe housing crisis in its modern history. Last year fewer than 13,000 new homes were built, while demand is running at 25,000 a year, the majority of it in the capital Dublin. In a twist worthy of the Irish comic writer Flann O’Brien, the enduring legacy of a financial crash caused by a debt-fuelled boom in home construction is an acute shortage of homes. ”
Housing does run in cycles. And they can be extreme at both ends.
Different parts of the cycle create different arguments, which you’re demonstrating. What Sarah did isn’t inherently unreasonable at all. If the market was as dead as Pripyat, people would be cheering her holding onto it and paying property taxes. During a housing crisis, it’s perceived very differently. In either case though, that’s distinct from saying that they are a speculator, or, that there are enough of those people in her circumstance to meaningfully skew the market. Personally, I feel sorry for her.
I’d speculate (forgive the terrible pun) that if we were having this conversation 5 years ago, you wouldn’t perceive what you’re perceiving re Sarah’s circumstance. Moving forward, I also suspect you’ll similarly change your tune once you’ve bought in and gone through a cycle or two, and you’ll see what I mean re the above.
Na, she doesn’t deserve the tax. It’s a wash, her effect on the market. If she sold it it would have been bought by a STR company to rent back to here on AirBnB driving up prices. Here intent was not to speculate so to make this retroactive on her is 100% BS. Hey, there is a savings tax if you don’t have 50% of your savings in Canadian Equities. Oh and by the way the tax is retroactive by 3 years…
Josh that’s a wow post. I really hope the government intervenes in your life one day and sticks it to you. Really ugly attitude by a lot of renters out there.
It’s people like “Sarah” that are driving up the costs, so ya. What’s your point?
I can’t help but think how many right wingers here would change their tune if “Sarah” was “Yu” and “Europe” was “China”. She fits my definition of a speculator. Holding a property that you’re not living in and not renting is unreasonable. She can afford the very small tax and if she wants to avoid it, she can sell or move back. I have boatloads of sympathy, just not for owners who aren’t using their property and aren’t even making it available to live in.
I can’t upvote Cynic’s last post hard enough. Please implement double and triple upvoting features so when someone lays out the Liberal nightmare the province dealt with so perfectly, they can be upvoted accordingly 😛
RR, people seem to have completely forgotten what a speculator is. Someone who holds an asset for a long time only for their own use is not a speculator. You can’t reclassify everyone who owns a home as a speculator just because some other people have driven local prices up.
Stress test is like building a dam in the river. After you build the dam the water flow decreases because you have dammed the river and the reservoir is filling up. Eventually it reaches steady state and the flow returns to normal as the reservoir is full and water flows over it at the previous rate. But you never get a rush of water, unless you lower the dam.
Fun fact: Nancy Bebble used to teach my challenge XC ski group approx 20 years ago.
Another fun fact is everyone freaking out about an 8% increase in hydro rates over 5 years which is less than inflation. Power is getting cheaper in real terms.
Barrister, thank-you. I am always surprised at how callous people have become. The language of revenge has become the norm now.
Should Sarah travel backward in time and sell her home so that Josh can buy it in 2014 before anyone cared about a bubble in Victoria?
If you’re referring to money laundering, I listened to a good radio interview with Eby. He came across well, and refreshingly honest. When the interviewer (Solomon) referred to money laundering in BC as past tense, Eby corrected him and said it’s an ongoing problem. Btw, the laundering in casinos started falling in 2015 with new measures done then. July 2015 is estimated as the peak. GreeNDP were elected in 2017.
But experts say that most BC money laundering did and still does occur outside of casinos.
Regarding the impact of money laundering on Vancouver RE. There may have been a few money launderers stupid enough to invest their illicit funds in long-term Vancouver real estate, for everyone to see. But reports I’ve seen are that laundered money doesn’t stick around in plain sight like that in illiquid assets to be siezed – it gets instantly sent to a different country – the basic idea of money laundering is to quickly lose the paper trail – not be an idiot and buy long term Vancouver real estate. Transfer it to China or Mexico or offshore. Most of these guys aren’t idiots.
Barrister politic and housing are 100% correlated since we have massive government intervention like we have never seen before by both Ottawa and the NDP.
Can we stay off the political spin debate for a while and just focus on housing. And I really dont care who started it.
Frankly, my main criticism is that if they decide to not grandfather people then the government lawyers are idiots for not including an appeal process for unintended inclusion or for hardship because of the retroactive nature of the statute. I am giving the politicians the benefit of the doubt here and am placing the blame on the legal department for not dealing with the predictable.
No uber
Uber annoying….I use Uber when I travel all the time. What is the rational behind not having it here?
I don’t think the typical customer will feel much of anything as their BC Hydro bill rises a little less than inflation over the next 5 years. Average BC customer pays $1,200 per year (link below), and their bill goes up 1.8% which is rising $22 per year, not $200 per year.
The BC govt announced increases to BC Hydro rates of 1.8% per year, which is 8% over 5 years. That’s likely less than inflation. It indicates to me that BC Hydro is a complex business, with costs rising in some areas (IPP) , and falling in other areas. It is natural for the politicians to want to assign blame for the cost increases and take credit for the decreases in costs.
https://www.cbc.ca/news/canada/british-columbia/energy-minister-donations-bc-liberals-power-producers-1.5019705
$1,200 average yearly BC Hydro customer bill: https://www.bchydro.com/news/conservation/2016/how-our-rates-compare.html
Josh: It is stupid to sell a property if you are going to be out of the country for just a few years. The transaction costs are huge for the average person. On top of which you still have to pay for storage for all your stuff here. You seem to be remarkable unsympathetic for other people while moaning about how unfair house prices are for you.
Cynic
No there are numerous reasons. High taxes/ bad for businesses. No real plan. Bad legislation. I can continue but that’s enough,
ICBC is a bigger mess that 2 years ago. NO real plan
BC Hydro no plan to deal with that
BC ferries expensive no plan to deal with that.
No uber
Spend spend on what no idea seen zero results so far. Cant keep blaming the liberal 2 years in.
gwac… right.
We should totally get rid of the NDP based on the spec tax and the minority of people it will annoy (who will easily be able to resolve I’m sure).
Let us bring back in the liberals… they were awesome. How does that extra $200 per person per year for Hydro feel or, lets use a bigger number and say $16B. Imagine being one of those companies that got the deal. BTW, did you know that the past CEO of BC Hydro was also the maid of honour for that great past liberal leader Christy Clark?
Or how about the all the money spent under the liberal watch at the legislature… I sure would like to have a new suit and some fancy souvenirs for my family expensed to the people of BC… or a $250,000 payout for retiring, but not retiring. Or, how about that smoldering pit of stink at ICBC. Libs did a great job there. I for one, am quite happy to pay almost double what people pay in Ontario just to ensure that money could be siphoned from that organization in order to maintain the illusion that the liberals were balancing the budget.
Or, why don’t we just talk about the money laundering. I’m pretty sure it was you who said that amount was a pittance and no big deal. Still think that? Pretty easy to connect the dots between the money laundering and real estate and fentanyl. It is an absolute shame we have allowed this to happen in the province… and guess who was at the helm that allowed it all?
Still believe your liberals have helped BC? At the very minimum they were absolutely ignorant and blind to what was going on… in which case they are absolute idiots and should not be permitted to even run a lemonade stand. At the very worse they were (and probably would still be) the most corrupt, self serving leaders this province has ever seen.
They helped those who funded them at the expense of the rest of us suckers. I’ve said it before and I’ll say it again, your blind loyalty and obedience to that party, and absolute hate of the NDP for no other reason than them being the NDP, is absolutely astounding to me and illustrates your complete inability to think critically.
I feel for Sarah, and it is absurd that she be faced with spec tax. In particular, the idea that she is a satellite family, and should be using the previous years tax return. I would check into that, as it isn’t clear from the govt website.
Here’s the govt page about satellite family https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax/exemptions-speculation-and-vacancy-tax/individuals/international-income#satellite-family
It says this… “People who declare LESS than 50% of their total combined household income ****for the year**** on Canadian income tax returns may pay tax at the highest rate and may not be entitled to all exemptions. People in this situation are considered members of a satellite family. This could apply to you even if you are a Canadian citizen or B.C. resident.”
As you can see, it refers to “the year” and not the “previous year”. In your example, I don’t see where 2017 tax return fits into it., because the return is for the 2018 year, And next year would be 2019 return, and presumably there’d be no spec tax due if they stick to 2019 info, if she is a can. resident in 2019.
This brings up another point. Where is the printed version of the spec tax questions, where we can see all the questions resulting from various options? This seems like basic transparency and govt best practises needed by taxpayers. All anyone sees is some online version of the questions that directly pertain to them. Has anyone found a printed version of all the questions?
Another point, cases like this bring up the need for experts on the spec tax, either lawyers or accountants. There are lawyers who specialize in speeding tickets, so there must be some ramping up to deal with spec tax issues. She should find one and contact them!
I have sympathy for Sarah. This tax thing wasn’t in place when she left. How was she to know? Hope she can get an exemption.
Once and Future –
How is Sarah not a speculator on her townhouse? If she wasn’t speculating, then wouldn’t it make more sense financially to sell and invest those funds somewhere else and not have to pay the costs of maintaining the house? If she were to rent out, she would likely be able to cover her carrying costs and provide enough income to support her visits back to Canada…
I am not for the tax myself, but it seems the only viable reason that “Sarah” is keeping this property is because she is expecting it to increase in value or has a very high emotional attachment to the property. If that is the case, then I can understand why a government trying to reduce the cost of housing and increase the rental supply may want her to pay a premium to keep it.
I am sure Sarah can call the number and get this sorted out as an exemption…..NDP sucks big time just to add…I was hoping for a comment section on the spec tax to express my opinion on their ineptness. No luck.
I don’t have much sympathy for Sarah. It wouldn’t have been “silly” to sell her condo when she left the country.
Leos, thanks for the great stats. I have posted before that I believed that a lot of the sales where to people from Vancouver and your great stats confirm this fact. My posts were partially based on the fact that the local Liberian in Oak Bay said that she was swamped with new library card issues for people from the lower mainland.
My suspicion is that a disporportion number of those purchases where in Oak Bay, Fairfield and James Bay. The other thing is mentioned is that a lot of people where fairly young in their fifties often, rather than the usual early sixties. This makes sense to me, if you are a government worker like a teacher or policeman and can pull a good pension retiring early selling your 3.5 million dollar home and buying here while banking two million makes sense.
You may recall that I was helping someone fill out their spectax form. While it is very straightforward for those of us who seem to fall in the “loudmouth” homeowner class, this little story provides some perspective (names and details altered for privacy).
Meet Sarah. She was born in BC and lived and worked in Victoria for most of her adult life. A number of years ago she saved up and bought a townhouse for a couple hundred thousand, when prices were within reach.
Sarah worked hard and reached a high level in her field, paying income taxes here in BC, eventually getting an offer from a European company to go work for them. She moved to Europe and, since every civilized country (cough, except the USA) taxes people based on residency, she paid tax to her new home country.
Sarah kept her Victoria townhouse since her elderly mother was still in the city. It seemed silly to rent it out and have to stay in a hotel whenever she visited her mom. She continued to pay her property taxes, contributing to local roads, parks, and schools, even though she only used services for a few weeks a year.
After 4 successful years in Europe, Sarah is now in her early 60s and decides to retire. She has lived frugally her whole life and can afford to come home to Canada to be close to family. She returns in late 2018 and settles back into her cozy townhouse.
What happens next? Sarah gets a “welcome home” letter from the BC govt. She logs into a new speculation tax webpage and starts filling out her form. It asks: Are you Canadian? She proudly answers “yes,” feeling lucky to live in such a great country. It asks: Were you a BC resident on Dec 31st, 2018? She says “yes.” It asks: Did you pay over 50% of your income taxes to Canada in 2017? She is puzzled. Of course she didn’t, she was working in Europe. What does where she worked in 2017 have to do with housing here in 2019? She ticks “no.”
On the next page we find that the question for “do you live in your home?” is strangely missing. The ominous website asks only if she rents her home to someone else or if it is uninhabitable, etc. She searches and finds nothing that applies to her.
Welcome home, Sarah. You are a filthy satellite family! You owe us $10,000 for your primary (and only) residence!
This will happen again next year, because the webpage will ask about Sarah’s income in 2018. Since she only moved back to Canada late in 2018, she gets the joy of another $10,000 tax bill before the BC govt decides she is no longer an evil speculator.
Now Sarah has a hard time talking to her BC friends about the “speculation” tax since all of them say that she must be “part of the problem” if she is subject to the tax. Sarah is careful with her money, doesn’t drive a fancy car, and didn’t even own a car when she lived in Europe. That $20,000 is a lot of money to come up with.
Now, you tell me: Will punishing Sarah like this help to fix local housing issues? Personally, I think this shows how the whole spectax legislation is a dog’s breakfast. Be careful of any government that uses the language of revenge when promoting a new tax.
Ah, a comic close to theme:
Updated the article to explain why the first chart (an old one) doesn’t go past 2016
That is a pretty stunning decrease of Vancouver buyers if we are back to 2014 numbers. It seems like those buyers are decreasing all over the island judging from sales. Add to this mix foreign buyer sales which have almost vanished and you can see why prices are not rising
One other thing to consider is that the nature of work is changing. It matters less where you sit now than it has in the past. Telecommuting, work from home, shared/community office spaces, etc. You don’t need to be in Vancouver, Calgary or Toronto the way you used to.
I actually was not surprised that Vancouver people would move here and cash in. (How hard was it to predict that someone could sell their house in Vancouver for $3million and buy a better quality house here in a very desirable neighbourhood, on a larger lot, for well under one million?)
I still believe that people in Vancouver will continue to move here. It will not be in such large numbers because, as Leo points out, it is harder for them to sell their $3million dollar house which is now only worth $2.5million. (Poor guys…they have been hit hard 🙂
The west coast is still the end of the road. The warmest place in Canada (hard to believe that right now of course) but the west coast is still a very desirable place in Canada. I do find it difficult to believe that Vancouver people would not jump off the moving train. They can sit where they are and watch another possible five hundred thousand dollars get shaved off their nest egg ……or they could make the move and get out now. That’s why I still believe that this trend will continue. Yes, it might be at a slower pace than before but still an important factor of where the movement will take place. And they will come to places like Victoria because Victoria is still almost one third less than Vancouver prices even with Vancouver’s weaker market. (When you compare inner core prices that is.)
Thanks Leo .. another great eye opener .. I am still convinced the oil crash have directly increased the number of Albertans retiring in Victoria.. is it possible to display data of
Albertan buyer?