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Premier David Eby has been clear that speculators are in his crosshairs, and with the 2024 budget his government has announced details of a new “BC Home Flipping Tax.”
Starting Jan. 1, any profits made from the sale of a residential home within two years of buying it will be subject to the tax – with exceptions.
The legislation government intends to pass during the spring session would see a sliding scale: 20 per cent on profits made on a home sold within the first year, gradually declining to 10 per cent if sold after 18 months, and further reducing to zero after two years of ownership.
The Ministry of Finance estimates the tax could generate about $43 million a year in tax revenue.
“The tax will apply to income from the sale of properties with a housing unit and properties zoned for residential use,” reads the Budget and Fiscal Plan. “The tax will also apply to income from the assignment of contracts to purchase these properties.”
For those selling their primary residence within two years of purchase, a maximum of $20,000 can be excluded when calculating taxable income.
Divorce, death, illness, and relocation for work, “among others” would be grounds to avoid paying the tax. The mechanism for appeal of the tax and what documentation will be required is still under consideration. Forms will be created by tax administrators between now and January, with details expected after the legislation is formally passed.
The revenues are earmarked toward the construction of new affordable housing in the province.
“The purpose of this tax is to support housing supply, not impede it,” reads the budget.
The tax comes into effect for properties sold starting Jan. 1, 2025, and “the tax will apply even if the property was purchased before the effective date.”
B.C. budget confirms billions in housing investments, offers rosy real estate outlook
The provincial budget has formalized billions of dollars in promises made by the BC NDP in recent weeks for programs like BC Builds, and it also provides an in-depth analysis of where housing market is and where the government believes it’s going.
Building permits were down last year and unsold inventory of new homes grew in the Vancouver, Victoria and Abbotsford areas compared to 2022.
Interest rates were blamed for slumping sales last year in B.C.’s largest housing markets, and the population continued to grow due to international immigration, while inter-provincial migration saw loss to other provinces for the fifth consecutive quarter (largely to Alberta).
Financing challenges, skilled-labour shortages, and ever-rising construction costs impacted the market and the number of new homes that were finished and ready for occupancy decline in the Vancouver and Kelowna areas, while Victoria and Abbotsford saw increases.
Despite that, “the ministry expects home sales activity to rebound in 2024 from slow activity in 2023” with prices expected to rise an average of 2.3 per cent this year and 2.9 per cent in 2025.
