The Speculation and Vacancy Tax (SVT) is an annual tax paid by some owners of residential properties in designated areas of BC. It’s intended to discourage housing speculation and owners leaving second homes vacant that could represent housing for others.

The program has been in operation in the Lower Mainland, Squamish, Lions Bay, Kelowna, West Kelowna and on the Island since 2018, and will be expanded next year with 13 new municipalities including Salmon Arm and Kamloops. Unfortunately, at time of writing, there is no word as to whether rural Salmon Arm, such as CSRD electoral areas, will be affected by this.

In 2024, the SVT will be applied for the first time to homes in these 13 additional municipalities that are not occupied for more than 6 months per year. Canadian citizens or permanent residents will be taxed 0.5% of the home’s assessed value, foreign owners and satellite owners will pay 2%, annually. An annual online declaration regarding usage of every home in these areas will need to be filed by March of the following year. Those who choose not to pay the tax may have Crown liens filed against their homes.

The BC Government says this tax will not apply to 99% of homeowners because of the many exemptions. Exemptions are available for: principal residence, previous principal residence, tenant-occupied residences, uninhabitable residences, secondary residences close to a medical treatment facility, recently bought or inherited properties, separation or divorce, bankruptcy, recent death of owner, property is in a trust for a minor or a charity, property is a strata hotel, licensed daycare facilities, water-only accessible properties, and others. For more information, please see the BC Government website pages on this topic.

The BC Government has proposed another new tax affecting real estate transactions, which is the BC Home Flipping Tax (no really,… that’s what it’s called!). If it proceeds, it will be applied to income from BC properties sold on or after January 1, 2025 if the property sold within 2 years from purchase, unless there’s an exemption. The tax rate will be 20% on income earned from properties sold within 365 days of purchase and will decline the longer a property is owned such that the tax is 0% at 730 days. The tax applies to income earned from the sale of properties with a housing unit, properties zoned for residential use, and the right to acquire the above properties such as assignment of a purchase contract. Both BC residents and non-residents are included. There is a long list of exemptions which includes circumstances such as divorce, death, disability or illness, relocation for work, involuntary job loss, change in household membership, insolvency, and personal safety. If you sell your primary residence within 2 years of purchase you may be able to exclude $20,000 when calculating your taxable income.  Further details on exemptions and this program are to be forthcoming. Whenever there are tax implications associated with a real estate transaction, you are strongly advised to seek the advice of a professional such as an accountant or lawyer.

What is the concern with radon in homes? According to Health Canada, radon is the second leading cause of lung cancer in Canada. Radon is a colourless, odorless, radioactive, naturally occurring gas which is generated through the decay of uranium and other minerals in the soil. It may accumulate in homes by seeping up through cracks in the basement walls and foundation. It is present in BC, but there is no good way to define safe and unsafe areas, and because radon is a gas, its levels fluctuate over time. No level of radon is safe, but a level above 200 Bq/m³ should be remediated within 2 years, and as a material latent defect should be disclosed to potential home buyers. There is no legal requirement to test for radon for home buyers or sellers, so it is not commonly included within  real estate transactions at this time. Testing requires the use of an approved monitoring device placed in a lower level of a home for at least 90 days. The “puck” is then sent to a lab for analysis and a report is provided. Costs for a test including the lab analysis total about $50.00.  Professional radon inspectors can conduct a quicker test using more expensive instrumentation. Remediation usually involves provision of a relatively inexpensive ventilation system. As public awareness of radon grows, it may become a more commonly used test in the future. Testing for radon and obtaining a “safe” level may provide homeowners with additional peace of mind as risks of lung cancer are reduced.

Three changes are being brought in for April 1, 2024, namely:

1. The threshold to be eligible for the first-time homebuyers exemption is increased from a fair market value of $500,000 to $835,000, with the first $500,000 fully exempt;  between $500,000 and $835,000 PTT is paid on a portion of the value; and above $860,000 the exemption is eliminated.
2. The newly built home exemption for purchasers who buy a newly constructed home as their principal residence will increase from $750,000 to $1.1 million in fair market value. Homes with a fair market value of between $1.1 million and $1.15 million will see a partial PTT exemption which will reduce but not eliminate the PTT; homes above $1.15 million will have to pay the PTT.
3. A new PTT exemption will be initiated for purchases of qualified purpose-built rental housing properties provided the building contains at least 4 apartment units, be non-stratified, be used as rentals for at least 10 years, and all residential uses of the building must be for rental purposes. This PTT exemption will apply to transactions for such buildings between January 1, 2025 and December 30, 2030. This new policy will work in conjunction with the Federal Government’s elimination of the 5% GST on newly built rental accommodations, and should hopefully incentivize the construction of newly built rental housing which is sorely lacking in our province.

The overall goal with these changes is to improve housing affordability in general, and to increase the availability of new  rental housing. 

Where is the real estate market going in 2024?

I get asked this question just about every day. It is of course, impossible to know the answer with any certainty. To answer this question I like rely on the views of expert economists.  In a recent press release, the British Columbia Real Estate Association (BCREA) predicted that unit sales in the Okanagan area will increase by 7.5% in 2024, with prices to increase by 1.3% to an average of $760,000 in this region. Brendan Ogmundson, chief economist of BCREA stated, “ In 2023, the housing market faced headwinds due to elevated mortgage rates, but the recent decline in fixed mortgage rates and potential Bank of Canada rate cuts present an optimistic outlook for 2024.” He went on to say, “ “As we navigate through 2024, we expect a delicate balance between rising sales and normalizing inventories, which should lead to a relatively quiet year for prices.”