British Columbia Sees Foreign Love Affair With Housing Enduringby and
Canada province sees $3.4 billion in purchases from overseas
B.C. boosts surplus seven-fold on strong economy, new tax
The party isn’t over yet for British Columbia’s real-estate market, if government forecasts are any indication.
The Pacific coast province, which imposed a 15 percent tax on foreign homebuyers in July to cool Canada’s most expensive property market, expects overseas investors to scoop up about C$4.5 billion ($3.4 billion) in real estate through March 2019, according to new estimates from the provincial government. Its biggest city, Vancouver, has been a magnet for global cash, where home prices are almost double the national average of C$473,105.
The tax and strong economic growth will lead to a budget surplus of C$1.94 billion for the fiscal year ending March -- seven times bigger than the C$264 million surplus in the February budget, according to an update released by Finance Minister Michael de Jong in Victoria Thursday.
“We’re in a good year,” De Jong told reporters, saying the province was benefiting from a robust economy, including more people working and earning, strong retail sales, and better-than-expected housing starts.
British Columbia has benefited from an economy less reliant on resources than some of its provincial neighbors, leading the nation in job gains and growth. It’s the only major Canadian province, along with Quebec, to not forecast a deficit for 2016-17.
The province expects to raise C$675 million over three years from the new real-estate tax, according to the documents. That’s based on assumptions that foreign buyers will purchase about 2,000 units a year at an average price of C$850,000. It pro-rated this year’s estimated revenue from the tax, which took effect on Aug. 2, at 65 percent.
De Jong cautioned those forecasts could change.
“It’s not an exact science,” he said. “I am admittedly nervous about those forecasts because it’s far from clear what the impact of the 15 percent tax will be on the market. We’ll be watching that closely.”
He said uncertainty about how the tax will play out is “probably the biggest reason” why the province also boosted its forecast allowance, a cushion intended to cover any shortfalls.
The province imposed the overseas buyer tax in a bid to stem the rise in real estate prices after an outcry from local families struggling to afford homes that chew up 90 percent of average before-tax income. Price gains are now beginning to slow, and Canadian home sales fell for the fourth-straight month in August, with Vancouver leading the decline.
Provincial revenue will be about C$50.5 billion this fiscal year, from a previous estimate of C$48 billion, the documents show. Economic growth for 2016 will be about 2.7 percent, from a previous estimate of 2.4 percent. Growth will slow to 2.2 percent next year.