Our View: Speculators tax not so simple

Taxing wealthy property speculators is always going to be a popular proposition. Taxing wealthy, allegedly foreign property speculators who are driving the middle classes out of the detached housing market? It sounds like a sure fire winner.

A new Insights West poll found 73 per cent of B.C. residents agree that taxing absentee homeowners to quell real estate speculation is a pretty darned good idea.

But what kind of a tax would deter speculation?

Take a look at the last 10 years of real estate values in the Lower Mainland. According to Fraser Valley Real Estate Board figures, the value of a detached house went up 80.8 per cent in the Lower Mainland in the last decade. That’s a pretty good rate of return compared to most stock markets, and unlike the Dow Jones or NASDAQ, there haven’t been nearly as many decreases in housing prices.

So sure, tax absentee home ownership. But unless you make the tax incredibly onerous, don’t expect it to change the behaviour of the investors much. After all, if you buy a $3 million mansion just so you can flip it for $4 million in a couple of years, what’s the problem with paying $50,000 in extra taxes a year? That’s still a fraction of the expected profit. Given how intense the market for housing is in B.C. right now, any speculators who do exist are likely to just tack that onto the selling price anyway.

Adding to the complications is figuring out what “absentee” is. A foreign buyer might rent their home, hire a decent property manager, and be an overall good landlord. Meanwhile, a born-and-bred B.C. resident could be flipping properties like mad. Are rented properties to be exempt? How long do they have to be empty before they qualify for any tax?

There’s been a lot of speculation about speculators, but with little hard information, any tax is likely to be ineffective, easily avoided, or to hit the wrong targets entirely.

– M.C.

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