One in five city residential properties could be affected if B.C.’s speculation tax is extended to Penticton according to the B.C. Real Estate Association.
The speculation tax, which is only coming down on properties in the Lower Mainland, Kelowna, West Kelowna, Victoria and Nanaimo at this point, will levy a two per cent rate against homes not lived in by renters or the owner for most of the year.
It was introduced in the B.C. NDP’s first full budget last month along with two other housing taxes.
That includes an expansion of the property transfer tax on houses valued over $1 million and an addition to the school tax for single-family homes valued at $3 million or more.
Of those three taxes, only the school taxes are not aimed specifically at the Lower Mainland and other larger markets like Kelowna.
“We could see, then, another source of demand where people that would be buying in Kelowna are shifting that purchase to areas outside of the speculation tax,” Ogmundson said, noting that shift in housing demand could go to Penticton.
Still, Ogmundson said between 10 and 20 per cent of buyers in Penticton are from Alberta, and some people might look at buying retirement getaways elsewhere if there is a chance the speculation tax will be levied in Penticton.
“So we don’t really know which thing’s going to win out, whether people are just going to swap a Penticton condo for a Kelowna one instead or if they will avoid B.C. altogether. There’s a lot of different things going on in the market and it’s hard to disentangle the effects,” Ogmundson said.
But Penticton MLA Dan Ashton is up in arms about the issue, tweeting regularly about the taxes over the last month.
“Where do you fight it? You start fighting it right at this level, not waiting to see whether Penticton’s in it or not,” said Ashton, who called it the NDP’s “war on upper end homes.”
“The NDP war on upper end homes ignores that many of these homes command premium prices because they involve significant work from skilled trades people and expansive furnishings from B.C. builder supply companies,” Ashton wrote in a tweet last month. “A blow for our residential construction and supply sectors.”
B.C. Building Trades executive director Tom Sigurdson said he did not speak from local experience, but he said his staff looked at the real estate market, which produced only a handful of $3-million-plus listings.
“I would suggest that anybody that can afford a $3-million home can probably afford the extra — I think it works out to $60,000 in taxation,” he said.
“If you can’t afford that $60,000, you can probably afford a $5,000 change order and get rid of the mahogany inlay and the gold-plated toilet.”
Ogmundson, too, said the taxes on $3-million-plus homes are not particularly tuned to address markets like the South Okanagan.
“Those sort of wealth taxes obviously aren’t going to impact most markets. Those are really kind of directed at the wealthiest neighbourhoods of Metro Vancouver and perhaps Victoria,” he said.
Critics have particularly noted individuals who have had a home for dozens of years and now find themselves in a position of owning a $3-million home, or in the case of the speculation tax, inherited a cabin, who might not be able to afford the fresh taxes.
And Ashton said that is the kind of homeowner he is going to bat for, adding that he is more in favour of supply-side economic policies like encouraging building rather than going after demand.
“I think what that particular member is doing is trying to say ‘oh my God, the sky is falling, and I have to tell the king,’” Sigurdson said.
“For the number of homes that are built that are over $3 million, in terms of its impact on the construction industry, I don’t think it’s going to have that kind of impact that somebody who is anti-tax in any form is going to worry about.”
But Ashton said he wasn’t trying to be alarmist about the issue.
“I’m not trying to be a fear monger here, I just hope that this isn’t the direction that they’re going in. But everything we’re being told is this is the direction that they’re going in,” he said, referring to the speculation tax. “It’s a tax on capital.”