With the new NDP government in British Columbia and their focus on escalating property values and tightening rental markets, some big changes are on the scene. Foreign investors and “satellite families” have been investing heavily in certain areas of British Columbia, contributing to double digit price increases per year over the past decade. This has been contributing to the problem of younger British Columbians not getting into the residential market, or paying for escalating rents due to people not being able to transition out of the rental market into home ownership.
The newly announced tax situation has a number of things to be aware of, but at the same time, this presents a number of areas of opportunity for those who act quickly. The “Foreign Investor Tax” has gone up from 15% on residential to 20% on residential, and has expanded from Greater Vancouver to also Greater Victoria, Greater Nanaimo, and Greater Kelowna areas. A separate “Speculation Tax” has also been added in these areas. It applies to owners who do not rent out a property for at least 6 months per year. It is levied at .5% of assessed value for British Columbia residents, 1% of assessed value for other Canadian residents, and 2% of assessed value for non-Canadian residents. British Columbia residents are also credited with no tax levied on the first $400,000 of property value and a $2000 British Columbia income tax credit on anything above that. Obviously the way to avoid the taxes as a foreign investor is to not buy residential in the above areas, or rent out your property for at least 6 months per year.
This brings us to some new “hotspots” for investors buying residential properties. A local anomaly in the Greater Vancouver market is a lovely island community called Bowen Island. While part of Greater Vancouver, it has been excluded from the “speculation tax” because it has only ferry/boat access. It has long been used as a quiet “bedroom community” for Vancouver, with people commuting by ferry or boat to Vancouver for work. The 20 minute car ferry ride leaves hourly during the day, so many people view this as more attractive than being stuck in traffic in a freeway commute. The island has an elementary school, community centre, and shops and services in a small town centre, as well as miles of coastline, trails, and parks. This little gem has about 4000 fulltime residents and properties that range from rural to quaint village locations. The property prices are well below Greater Vancouver average prices, with house prices on the island typically one third cheaper than an equivalent property in the Vancouver suburbs.
If this opportunity catches your imagination, your team at Maude, MacKay & Co. Ltd. would be glad to assist you in achieving your dream of home ownership in an idyllic location. Please get in touch!
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