Estimating the Impacts of the Speculation and Vacancy Tax
BCREA
Summary Findings:
- While all BC markets experienced sharp declines since 2018, the Speculation and Vacancy tax(SVT)is estimated to have reduced home sales in taxable regions in BC byan additional15per cent compared to non-taxable regions. Growth in home prices since 2018 is estimated to be5 per cent lower in taxable regions in BC compared with non-taxable regions due to the SVT.
- However, these impacts effectively disappear if Metro Vancouver markets are excluded from the analysis, suggesting the impact of the SVT has been limited to Metro Vancouver.
- A recovery of home sales is underway around the province, and without addressing significant supply issues, any progress made toward improved affordability looks to be short-
- The SVT’s impact on the rental market also appears to be more material inMetro Vancouver, where there was a record increase in rental supply, yet it is not possible to disentangle this from impacts of the Empty Homes Tax and short-term rental regulationsthat were implemented around the same time.
Introduction
Since 2018, several housing policies designed to dampen demand and household indebtedness have been implemented by federal, provincial and municipal governments. These include the federal government’s revised Guideline B-20, generally referred to as the mortgage stress test, the increase and expansion of the province’s Foreign Buyer Tax (FBT), and the new Speculation and Vacancy Tax (SVT). This period also coincided with interest rates gradually rising from very low levels.
Given the concurrent implementation of these measures, it is difficult to isolate each policy’s impact on the housing market. While this report focuses on the impact of the SVT, the provincial government also increased the FBT rate from 15 to 20 per cent and expanded the geographic scope of the taxable regions. While foreign transactions have declined, that downtrend occurred well before Budget 2018 and was likely prompted by external factors such as tighter capital controls by the Chinese government in 2017(Figure 1).Given there is considerable overlap between the SVT and FBT regions, our estimated impacts could be viewed as capturing the combined impacts of the province’s Budget 2018 policy measures.
Read the full report HERE
© BCREA
