B.C.'s new property flipping tax is intended to discourage speculators. Some are skeptical

The measure designed to discourage property speculation but industry insiders worry the province's property flipping tax will discourage possible listings which will limit housing supply.

Published Jan 01, 2025  •  Last updated 0 minutes ago  •  3 minute read

A for sale sign on a house in east Vancouver. Photo by Gerry Kahrmann /PNG

A Metro Vancouver real-estate agent says some property investors rushed renovations on homes purchased in 2024 in order to sell quickly and avoid the province’s property-flipping tax, which took effect on Jan. 1.

Article content

Article content

“The shock effect of the tax is already absorbed, in my opinion,” Adil Dinani said, referring to the real-estate market. “I think it is already baked in, in terms of how investors are pivoting.”

Article content

The measure is intended to discourage speculators from making a quick buck by buying and reselling homes over a short period, by slapping a steep tax on profits earned from selling less than two years after buying.

Dinani, with the Dinani Group of Royal LePage West, reckons such buyers, who typically renovate homes before selling, will simply hang on to them longer, which will limit supply in the property resale market for a while.

The province introduced the measure to help curb speculation that drives up property prices, according to a statement by Housing Minister Ravi Kahlon.

B.C. imposed the tax after property values soared through the 2021 COVID-19 pandemic, when average prices jumped 23 per cent in the Lower Mainland and Vancouver Island, according to figures from the B.C. Real Estate Association. The Thompson Okanagan shot a little higher.

Flipping houses looks less lucrative in 2024, particularly in the Lower Mainland where the average home price in November was six per cent lower than the end of 2021, at an average of $1.17 million. That price, however, represented a four per cent increase since January.

Article content

Article content

Still, the province expects the flipping tax to apply to 4,000 transactions in 2025 and raise $43 million in tax revenue.

That estimate is based on an evaluation of sales between 2020 and 2022 that showed seven per cent of homes were sold within two years of purchase, often at higher prices, according to an unattributed statement from the Ministry of Finance.

Now, homes sold within two years will be hit with a tax on profits earned, starting at 20 per cent if it is within one year, 10 per cent at 18 months, then zero after two years.

The measure does come with exemptions in the case of “life changes,” such as divorce, death, job loss, a threat to personal safety or bankruptcy.

The B.C. Real Estate Association worries that the measure will discourage potential sellers from listing properties, even if they might qualify for exemptions, to avoid the scrutiny, said Trevor Koot, the organization’s CEO.

“Somebody has to prove that they’re part of an exclusion, (then) somebody has to audit that,” Koot said. “There might be questions. There’s stress related to that, when they’ve already had stress related to whatever their life scenario is.”

Article content

“And that delay doesn’t just impact the amount of housing that’s available, it actually impacts other revenue sources to the government like property transfer tax,” Koot said. “It won’t have the impact that the government is suggesting.”

Dinani argued that “renovation buyers” fill a niche in the market by turning homes built in the 1950s or 1960s into “move in ready” properties that don’t come with the premium price tag of new homes.

“Many of our clients that are buying homes, they just can’t buy homes that need renovations because they’re just making the down payment,” Dinani said.

“We’ve got policy fatigue,” Dinani argued.

In his opinion, government should “take a step back and analyze the market impact (of) the plethora of new policies and taxes that they’ve introduced and some of the unintended consequences.”

The province said its policy measures have produced results. The speculation and vacancy tax raised $75 million in 2023 and investors put 20,000 condo units into the long-term rental market, according to the Ministry of Finance.

The flipping tax does send the message that “there’s no more free parking, or free parking is limited in Vancouver residential real estate,” said Andy Yan, associate professor of planning and director of the City Program at Simon Fraser University.

Article content

With respect to discouraging speculation, “this is legislation that should have been there 10 years ago,” Yan said.

“I don’t know if as much flipping occurs right now,” he added. “I think we’re at a point where flipping isn’t all that attractive.

Yan also wonders how rigorous the verification will be for enforcing the exemptions and what consequences there will be.

However, he does see it as important legislation that is complementary to provincial legislation related to transit-oriented density.

[email protected]

x.com/derrickpenner

Recommended from Editorial

1. 

   B.C. man who flipped 14 homes in four years is fined $2 million for tax evasion

2. 

   B.C. flipping tax: Here's who will have to pay — and how much

Article content