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Anti-Flipping Tax – Provincial – Starting January 1, 2025 , If a property is sold after January 1, 2025 and was only owned/lived in less than a 1 year you will pay a 20% provincial tax on the profits.  This tax declines to zero after 24 months  BC anti Flipping Tax. 

Exemptions to this tax are; Separation or divorce, Death, Disability or illness, Relocation for work, Involuntary job loss, Change in household membership, Personal safety, Insolvency.

Anti-Flipping Tax – Federal – If bought and sold within 1 year, the profit is taxed as Income. No capital gains exemption and no Principal residence exemption Federal Flipping Rules

All other BC taxes on Real Estate:

GST – 5% tax on new, never lived in or substantially renovated properties. With a 36% rebate on new homes up to $350,000 purchase price GST Info & Calculator   Also GST is (may) be payable on the sale of vacant land.   Examples of when G.S.T. would be applicable include:

1) the sale of land that is capital property that had been used primarily in a business;

2) the sale of land in the course of a business; and

3) the sale of a parcel of land created by subdividing another parcel into more than two parts. The sale of land by an individual that had been kept for personal use would be exempt from G.S.T.

Sale of Farm land.    Farmland GST ?

PTT (Property Transfer Tax) – 1% on the first $200,000 of purchase price plus 2% up to $2,000,000 plus 3% from $2,000,001 to $3,000,000. Plus 5% over $3,000,000  PTT Info & Calculator

Under-Used Housing Tax – Federal – a 1% tax on Vacant or ‘underused’ housing. “Under used” is defined as less than 180 days in a year. You will be exempt if “The property was occupied by certain parties for at least 180 days in the year, made up of one or more periods that are at least one month long.”  Fed’s Underused tax info

Speculation & Vacancy Tax  –  2% of the fair market value for satellite families and foreign owners. OR  0. 5% for Canadian citizens. To avoid the tax you must rent out your non-principal residence, for at least 6 months of the year.  

This tax applies to areas:

• The Metro Vancouver Regional District (Vancouver, Surrey, etc.)
• The Capital Regional District (Victoria, Saanich, etc.)
• The City of Abbotsford
• The District of Mission
• The City of Chilliwack
• The City of Kelowna
• The City of West Kelowna
• The City of Nanaimo
• The District of Lantzville

And expanding in 2024 to ;

• Lions Bay
• North Cowichan
• Ladysmith
• Lake Cowichan
• Squamish
• Duncan

BC Speculation and Vacancy Tax

Vancouver Vacant Homes Tax: – Applies to the City of Vancouver only.  Started in 2017 at 1% of the tax assessed value and is now 3% of that value.

A Vancouver ‘vacant home’ is one that is unoccupied for more than 6 months in calendar  year.

Foreign Buyer Tax.      The BC Foreign Buyers Tax is a 20% tax added to the property Transfer Tax when a foreign citizen or non-permanent resident of Canada purchases a residential property in the following areas;    Foreign Buyer Tax areas

“School Tax” –  BC introduced the  ‘School tax’ in 2016 – funds collected go into General Revenue’  – and spent on ??   It amounts to  0.2% of your assessed value from $2 million to $4 million plus .4% of your value over $4 million.   And, as it is not indexed to inflation (like the PTT), it may end up applying to the majority of BC properties – not just the high end properties.  BC School Tax info

Translink –  As of Jan.1, 2023  Translink collects (through your municipal property tax remissions .2172 times the value of your property divided by 1000. So a $1 million dollar property will pay  $217.20 per year.

Municipal Property Taxes – in Coquitlam for 2024 the City is proposing a 7.7% (base) property tax lift – Citing Unprecedented growth and high inflation in Coquitlam are prompting a proposed 10.79 per cent hike in property taxes next year — if all asks are approved.

The 2023 Coquitlam residential rate is:  .392%  of your property’s value. So a $1,000,000 home would pay $3920 in annual property taxes. (plus water & sewer taxes, Translink, etc)

 – Aims to provide more affordable housing options by encouraging homeowners to create secondary suites, such as basement suites, garden suites, or laneway homes. 

– One key feature is the provision of 50% forgivable loans. Homeowners can receive up to 50% of construction, design, and implementation costs, with a maximum forgiveness cap of $40,000. So if it costs you $80,000 to build a secondary suite, the program will forgive 50% or $40,000 of that cost. The forgivable loan is registered on the title, and it is repaid over five years, with 20% forgiven annually. Applications for the Secondary Suite Incentive Program will open in April 2024 and will be processed on a first-come, first-served basis. Click here SSIP Details

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Property Transfer Tax Exemption Increased from $500,000 to $835,000 but…..you will pay 2% tax on the portion of purchase price above $500,000 – as long as it is below $835,000.

For First-Time Home Buyers: The First-Time Homebuyers’ Program, which provides qualified homebuyers an exemption on Property Transfer Tax now extends to homes with a purchase price of up to $835,000. Here’s how it breaks down depending on the fair market value of the home:

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In a 2011 Lawsuit against the government of Canada it was alleged that the Bank of Canada was established in 1938  to  – among other things –  provide interest free loans to Federal, provincial and municipal governments to finance public infrastructure projects. Examples of the projects financed in this way are; the TransCanada Highway, St Lawrence Seaway, electricity projects, pipelines, airports, universities etc. Further benefits of the Bank of Canada is that no interest – or low interest – loans could be made to unstable (failing?) financial institutions in Canada. A lender of last resort if you will.

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When the market was over heated (Demand much greater than Supply) – prior to spring 2022 – prices were crazy and buyers were stressed. So our federal government decided they had to do something. Casting foreign buyers (2% of all buyers in Canada / 3.3% in B.C.) as the scapegoats responsible for driving real estate prices to dizzying heights, the government decided they had to do something. 

When the market was cooling down, as a result of a massive increase in interest rates- driven by inflation, the Feds decided now was the time to unveil  The Prohibition on the Purchase of Residential Property by Non- Canadians Act  . 

This Act was passed in June 2022 but the details were not released until late December 2022 and came into force January 1, 2023 – less than 2 weeks later.

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The Bank of Canada says no new rate hike IF inflation falls.

And in his prepared remarks Tiff Macklem said, “We are prepared to raise interest rates further.” 

So the question is – where is inflation going?

• 2021 electricity costs in Canada  https://www.energyhub.org/electricity-prices/

• In 2018 it was 11.4 cents / KWH. In 2022 it was 12.6 cents  a 10% increase in 4 years

• BC Hydro set to raise electricity bills 2% this year and 2.7% next year

https://www.narcity.com/vancouver/bc-hydro-is-dropping-electricity-bills-but-brace-yourself-for-price-hikes-in-2023-2024

• For natural gas in 2018: 

Basic charge (for maintaining infrastructure and delivery system ) = $.389/day

Delivery Charge (?) = $4.355 per Gjoule

Storage & Transportation (?) = $.758 per Gjoule

Gas cost = $1.549 per Gjoule

• The average BC house uses about 10 Gigajoules per month averaged over the year.

• 2023 Rates;

Basic Charge = $ .4216 per day

Delivery charge = $5.933 per Gjoule

Storage & Transportation = $1.134 per Gjoule

Gas cost = $5.159 per Gjoule

Cost per month in 2018 = $78.29

Cost per month in 2023 = $134.91          a $56.62 increase or 72.3% increase in 5 years 

= 14.5% increase per year.

In his Dec.2022 speech, Tiff Macklem said;

“One single thing didn’t cause inflation to climb to the highest it’s been in decades. Several unexpected factors combined and interacted with each other to drive prices upward:

• Supply chain problems were more widespread and lasted longer than expected. This increased the prices of many goods imported into Canada.
• Russia invaded Ukraine, causing the prices of oil and some agricultural products to rise around the world.
• When the Canadian economy fully reopened, consumers wanted to catch up on what they had missed during two years of lockdowns. But businesses couldn’t keep pace with the higher demand—especially for services.

Not helping with inflation is the recent BC government penalty on the fuel needed to heat our homes – from 7% tax to 12% tax.  That is a 71% tax increase.

• Horgan raised BC’s energy taxes – gas furnaces, gas fireplaces, gas stoves… https://www.hpacmag.com/heating-plumbing-air-conditioning-general/b-c-raising-sales-tax-on-fossil-fuel-appliances-cutting-tax-on-heat-pumps/1004134028/

• And now there is the Carbon Tax  on Natural gas – for the average home  amounts to $227 per year.  https://biv.com/article/2023/02/carbon-tax-gets-jacked-again-year

• A carbon pollution price (carbon tax) of $20 per tonne of carbon dioxide equivalent (CO2e) in 2019, rising by $10 per tonne annually to $65 per ton in 2023

 = a 225% increase over 4 years.

Food prices & ? –  

Mr Macklem said: “Supply chain problems were more widespread and lasted longer than                                      e                              expected.”

How is the government helping? 

• 30% reduction in chemical fertilizers https://www.bizpacreview.com/2022/07/24/justin-trudeau-proceeds-with-cap-on-fertilizer-use-despite-risk-of-food-shortages-bankrupt-farmers-1265443/
• In Sri Lanka when that government banned chemical fertilizers  “One-third of Sri Lanka’s farm lands were dormant in 2021 due to the fertilizer ban. Over 90 percent of Sri Lanka’s farmers had used chemical fertilizers before they were banned. After they were banned, an astonishing 85 percent experienced crop losses. Rice production fell 20 percent and prices skyrocketed 50 percent in just six months. “

• Or the Ontario government forcing the dumping of milk over the government quota amount.  https://catalyst.independent.org/2023/02/07/farmer-dump-milk-canadian/

• More to come this year?  Bird flu culling?

Gasoline Prices;

Mr Macklem says;“Russia invaded Ukraine, causing the prices of oil and some agricultural   products to rise around the world”.   But….

• 78 cents per litre is tax. (which includes 2 provincial carbon taxes amounting to 31 cents / litre). 47% of the price you pay at the pump is Tax.

• In February 2018 – regular gas was $1.44 per litre. For most of 2022 the price per litre was $1.90 to $2.04 – a 39% increase from 2018.  

• Canada’s Oil reserves (168 Billion barrels) accounts for 75% of North America’s reserves which is 188 times our annual consumption. 

• Canada holds 170,863,000,000 barrels of proven oil reserves as of 2016, ranking 3rd in the world and accounting for about 10.4% of the world’s total oil reserves of  

            1,650,585,140,000 barrels. 

• Canada has proven reserves equivalent to 188.3 times its annual consumption.

What about the impact of Government debt on inflation.

• Financial Post says Canada leads the world in debt.  Canada accumulates $75 million per day in interest charges alone.

• BC’s debt is $98 Billion.  Canada’s Federal debt is $1.2 Trillion

• Moreover, the federal and provincial governments are on track to have collectively accumulated $395.9 billion (inflation-adjusted) in total net debt between 2019/20 and 2022/23, an increase of 23.4%.

• The interest we pay on that debt amounts to just over 2% ,  so Canada is paying an extra $7.9 BILLION in interest in 4 years = almost $2 billion per year in interest!

https://torontosun.com/opinion/goldstein-trudeaus-runaway-spending-hiked-canadas-debt-160-billion-before-pandemic-hit-report

• During the 2015 federal election that brought him to power, Trudeau promised three years of “modest deficits” — $9.9 billion in 2016, $9.5 billion in 2017, $5.7 billion in 2018 — and a balanced budget with a $1 billion surplus in 2019.
• Instead, he delivered annual deficits of $19 billion in both 2016 and 2017, $14 billion in 2018 and $39.4 billion in 2019 — all before the pandemic hit in early 2020.
• Canada’s combined federal debt — the total of all previous deficits plus interest — went over $1 trillion for the first time in 2020-21 during the first year of the pandemic and is now projected to increase to $1.36 trillion by 2026-27

And while the government debt is not part of the Basket of Goods used to calculate the Consumer Price Index (i.e. inflation), it nonetheless has a major impact on the purchasing power of our dollar.  Consider this;

• The Canadian dollar has lost 96% its value since 1915 (up to January 13, 2022)
• $100 in 1915 is equivalent in purchasing power to about $2,467.68 today, an increase of $2,367.68 over 108 years. The dollar had an average inflation rate of 3.01% per year between 1915 and today, producing a cumulative price increase of 2,367.68%.
• This means that today’s prices are 24.68 times as high as average prices since 1915, according to Statistics Canada consumer price index. A dollar today only buys 4.052% of what it could buy back then.   So that $7 head of lettuce today would have been 28 cents in 1915.
• https://www.in2013dollars.com/Canada-inflation

Will inflation come down?  

We will know more when The Bank of Canada meets March 8, 2023 for the next interest rate decision.

Along with the change in premiers from J. Horgan to David Eby, an all-encompassing affordable housing plan has been outlined to create more housing for British Columbians and at the same time create opportunities for savvy real estate investors. Here is the breakdown;

• Fast-Tracking development: 
For subdividing land into higher density parcels, developers have been handcuffed by municipalities dragging their feet on approvals. A recent client’s experience took 3 years to subdivide 2 lots into 3 lots. Despite possible objections made by local government, investors can now appeal directly to the province to have multi-family permits fast tracked. This will expedite the sale of the assembled lands to developers, over and above any objections the locals might have. 

• Triplex Zoning for Everyone: 
Each single family detached house will automatically be zoned to allow three dwellings within it. This is a boon to investors because they can now legally add two rental suites as mortgage helpers. This would certainly stem any price slide as buyers could now use the rental income to qualify for a higher mortgage. And any parking spot shortage would be solved when cars are outlawed 😉

• Tax Dollars To Buy Old Apartment Buildings: 
With our provincial rental caps failing to keep up with the rising costs that landlords face to invest in maintenance, repairs, and renovations, selling these buildings is difficult as the numbers typically don’t work for a decent return on investment. But now the govt will be giving $500 million taxpayer dollars to back tenants’ groups, First Nations and non-profit organisations to purchase these aging properties. 

• Flipper Tax: 
Thanks to the current economic downturn, real estate flipping has all but disappeared in BC so this new policy is not too exciting. BUT what will be yet another government rule is a graduated tax (noooo ..not another tax!) on selling the property you just bought. After 2 years of ownership that ‘flipper tax’ will be zero but what is will be before that has not yet been ironed out. Hopefully the Feds will not implement their talked about home equity tax in the interim. 

• No more rental restriction Bylaws: 
The province is going to outlaw the right of a strata corporation to restrict rentals in order to increase rental supply. The idea is that investors will scoop up these units to rent them out at the high rental rates we are now experiencing and the current condo owners who don’t want to live in a ‘rental’ building will have to sell adding more units to the rental pool. But where will they go? 

• Detached homes 47.2% fewer sales & HPI benchmark price up 1.6% from Oct. 2021.
• Apartments – 44.8% fewer sales –    &  HPI benchmark price up 5.1%
• Attached (twnhse & duplexes)   – 44.8% fewer sales & HPI benchmark price up 7.1%
• The number of active listings are up 22.6% from Oct 2021
• Current 5 year fixed ‘posted rate’ is 6.34%  – but buyers must ‘qualify’ for a mortgage at 8.34%.  The best discounted rate is  5.14%

• The next Bank of Canada (BoC) meeting is December 7^th – which may be another .5% hike.  Here is the history of the BoC’s rate hikes this year;
• January 26    –  no change. Inflation at 5.1%
• March 2 +  .25 %
• April 13 +  .50 %
• June 1 +  .50 %
• July 13 + 1.00 %
• September 7 +  .75 % inflation at 6.9%. (in BC it was 7.7%)
• October 26 +  .50 %.     Inflation rate to be released November 16

The Bank of Canada’s Overnight rate sits at  3.75%  – (it was .25% in January 2022). 3.75% is well above the bank’s estimate of the neutral rate (2 – 3.00%).  

According to economists that means monetary policy is no longer working, and the results speak for themselves – a  93% increase in the bank rate from January to November has resulted in an inflation rate that went from 5.1% (January)  to  6.9% today.   

Clearly, with no brakes on government spending plus supply chain disruptions, interest rate changes are having no effect.  

Hopefully the Canadian government is not following the IMF managing director’s advice that  “central banks should continue to raise rates…. & … it would take until 2024 for the positive effect of central banks raising rates globally to be felt.”  

If your mortgage is coming due in 2023 consider getting a 120 day rate guarantee now as well as checking out how much your early payout penalty would be.

The good news? 

September’s CPI numbers suggest that inflation may be slowing, despite certain areas such as food prices purchased from stores (+11.4 %) growing at the fastest pace since Aug. 1981.

Average hourly wages were up 5.2 % from this time last year – but still well below inflation.

The second lowest unemployment rate in Canada was BC at 4.3% .

Housing starts were up by 8.8k in Vancouver and 1.3k in Abbotsford, but were down by 4.5k in Kelowna and 1.2k in Victoria. The 6-month moving average trend rose 7.7 % to 50,500 housing starts in BC. 

Interest rate hike reasoning Tiff Macklem – governor of Bank of Canada says:

National Post Comment, August 16, 2022 

Inflation in Canada has come down a little, but it remains far too high. After rising rapidly to reach 8.1 per cent in June, inflation as measured by the consumer price index (CPI) was 7.6 per cent in July.

The good news is that it looks like inflation may have peaked. The price of gasoline, which has contributed about one-fifth of overall inflation in recent months, declined from an average of $2.07 a litre in June to $1.88 a litre in July. And we know gas prices at the pump have fallen further so far in August. Prices of some key agricultural commodities, like wheat, have also eased, and global shipping costs have fallen from exceptionally high levels. If these trends persist, inflation will continue to ease.

The bad news is that inflation will likely remain too high for some time. Many of the global factors that have pushed up inflation won’t go away quickly enough — supply chain disruptions continue, geopolitical tensions are high, and commodity prices remain volatile. And here at home, our economy has been running too hot. As Canadians finally enjoy a fully reopened economy, they want to buy more goods and services than our economy can produce. Businesses are having trouble keeping up with demand, and that’s leading to delays and higher prices. The result is broad-based inflation. Even if inflation came down a little in July, prices for more than half of the goods and services that make up the CPI basket are rising faster than five per cent.

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One in 4 working Canadians work for the government:

Over 24% of Canada’s work force is in the ‘public sector” (i.e. government) Fraser institute article from 2022

 “However, since then the share increased, peaking at 24.4 per cent in 2010 before dropping slightly to 24.1 per cent by 2013. The public sector now employs a bigger chunk of Canadians than it did in 2003. In fact, over the 10 years leading up to 2013, all provinces (except Newfoundland & Labrador) saw an increase in their share of public-sector employment. Today, over 3.6 million Canadians now work for the public sector.”

https://www.fraserinstitute.org/article/times-have-changed-public-sector-employment-on-the-rise-in-canada-especially-in-ontario