Will today’s BC budget have any real effect on the Metro Vancouver real estate market?

VANCOUVER (NEWS 1130) – There have been a lot of promises, but will you see any real relief after the provincial government tables what it says will be its fourth consecutive balanced budget today?

When it comes to navigating the red-hot real estate market in Metro Vancouver, the jury is out.

Affordability has been a keyword in the lead-up to this budget and it’s expected that several policies will be unveiled to reflect that.

• NEWS 1130’s Martin MacMahon is in Victoria and will provide full coverage when the budget is tabled this afternoon

 

“We are hopeful Premier Christy Clark will listen to economists at the University of British Columbia and Simon Fraser University and address the flow of capital from outside of Vancouver into vacant homes,” says Tom Davidoff, an associate professor at UBC’s Sauder School of Business.

“That’s subtracting from the housing stock and driving up prices. If we discouraged the use of homes as pure investment vehicles and encouraged their use a properties that provide homes for people living and working in the Lower Mainland, that would actually help affordability. Unfortunately, there’s not much on the table otherwise that would have any real benefits for people trying to get into the housing market.”

One idea that has been floated is a reduction in the property transfer tax for first-time buyers, but Davidoff suggests that would not work.

“The problem is because we don’t build a lot of housing in the Lower Mainland relative to the price increases we have seen, for the most part, any reduction in taxes is just a gift to home owners,” he explains.

“It’s true that the buyer writes the cheque in the property transfer tax, which may be lowered for first-time buyers, but just because you write that cheque doesn’t mean you’re really the person paying it. When you tell first-time home buyers they have to buy a house to get this benefit, that encourages people to pay more and you drive up the price of housing. It’s a terrible idea in an inflationary housing environment like the one we have.”

Davidoff calls it a “non-serious” attempt at fixing the problem and David Moscrop in the political science department at UBC agrees.

“The real estate tweaks that are likely to show up in the budget are not huge — these are fairly marginal, fairly conservative moves,” he tells NEWS 1130. “I think it reflects the fact that the province doesn’t really know what to do about the situation.”

Moscrop says the BC Liberals’ expected moves to try to moderate the housing market are more than just “window dressing,” but not by much.

“They will help people and it is an attempt to do something, but I don’t think it will be particularly effective. Economists disagree what the effects will be and politically it will likely be a fairly neutral move. People will pick up on the fact that this will not do a ton to address the problem,” he says.

“It’s hard to blame the BC Liberals for the housing market that’s run amok in Metro Vancouver. I mean, they haven’t done a lot yet, but the problem is much bigger than them.”

Meanwhile, Davidoff says if the provincial government is serious about affordability, it will add a second tax bracket for real estate sales.

“If your home isn’t occupied and you aren’t exempt, you are required to pay an extra 1.5 per cent property tax. That would put a real dent in the use of homes as vacant investment vehicles. That would really enhance affordability and that’s the only real tool that I’m aware of that’s available to the premier. Hopefully that will be in the budget.”

Changes to MSP are also expected in the budget, but calls from the Green Party and others to eliminate it altogether have failed to convince the premier. Christy Clark argues that while MSP is antiquated in its current form, it reminds people we all need to pay for health care.

The last projection from the province was back in the fall, when we were told to expect a surplus in the region of $265 million.

The provincial budget will be tabled in the BC Legislature after North American markets close today.

NEWS 1130’s Martin MacMahon is in Victoria and will be providing full coverage.