Photo: Contributed
Kelowna real estate developer and founder of Vantage West Realty, AJ Hazzi, has been busy putting fires out since the provincial government’s recent budget introduced a new speculative residential tax on Kelowna and West Kelowna.
Taxes don’t include Vernon or Penticton, in fact it stops at Lake Country on the east side of Okanagan Lake at this point and includes the city limits of West Kelowna.
But even brokers aren’t sure of the exact limits.
Okanagan and Albertan residents in particular are affected by the province’s existing foreign buyer tax, which will rise from 15 percent to 20 percent.
In 2018, the tax is 0.5 percent of the value of the home and two percent in the following years.
The new speculative tax is due to come into effect next fall and is aimed at homebuyers who do not pay income tax in British Columbia.
Real estate owners like Jim Daynard, who plans to sell their lakeside property this spring, are concerned they won’t make it.
“It was my dream to have a place by the lake and the government is screwing it up,” he says.
Daynard says his neighbor is from Alberta and may have to sell his lakeside property, “if he’s taxed it could cost him $ 30,000 to $ 40,000, and he can’t afford it.”
Treasury Secretary Carole James said in her budget address that the province will begin tracking information on pre-sales, but it will be kept confidential for the time being.
She has not taken any action to change the rules for advance booking.
Developers and real estate experts in the Okanagan fear the new taxes could affect the construction and sale of recreational and second homes for people outside the province.
Hazzi says it’s important to put the tax in perspective.
“It’s important to remember that only 20 percent of real estate transactions in the valley are with buyers outside of British Columbia. How many of those 20 percent intend to buy a property and leave it empty? ? The answer is a pretty small number; not so many people leave their property empty in the valley. “
“A simple way to avoid the higher taxes is to hire a property manager and put a tenant in the house for the part of the year in which he does not live in the apartment and would be exempt from it.”
The speculative tax is there to intercept those property owners who buy property as a speculative investment and have no intention of living in the property.
Hazzi says that’s only about five to six percent of the market.
“Even if these houses were to come back on the market, we currently have so little supply that it would not be enough to send the market into a slump.”
Hazzi says this is a very politically charged topic.
“The politicians try to put on their capes and pretend they are doing something for affordable housing,” he says.
Hazzi believes that over time it could actually have the opposite effect, by removing the incentive to buy rental properties, which could further shrink supply and drive rents up.
Most developers agree that steps must be taken to make the valley market encompass all areas of life, but “the free market is always the better way”. according to Hazzi, “it will go better on its own.”
