British Columbia’s government wants to crack down on tax evasion in the condominium market and gives municipalities more control over rental housing as it looks for ways of easing a housing crunch.
Finance Minister Carole James said that legislation introduced earlier this week would require developers to collect and report buyer information on the purchase and sale of condos before they are built to ensure the proper amount of tax is paid.
The prices of so-called presale condominiums are inflated by people who buy and sell the properties without ever living in them or paying capital gains tax, she said.
“This is a key step to stopping people from using presale condos as a quick, lucrative investment,” James told The Canadian Press. “It’s also to stop them from driving prices up for British Columbians trying to get into the housing market.”
She added that the government will share the presale data it collects with the Canada Revenue Agency to monitor taxes.
The agency said last fall that it was analyzing 2,810 transactions of pre-construction condo flipping in Toronto, and may carry out audits to find tax evaders. The agency stated that real estate deals in the hot housing markets in the Toronto and Vancouver areas have been the subject of greater scrutiny.
James said that the April 24 legislation follows the New Democrats’ pledge earlier this year to spend more than $6 billion on affordable housing over the next decade. She noted that too many people in B.C. cannot afford homes and some, including seniors, are at risk of becoming homeless.
Read more: Presale condo cancellations also apparent in Vancouver
The provincial government recently introduced a speculation tax on some vacant homes to encourage rentals, increased the foreign buyers’ tax on property sales, and created a housing hub program to link non-profit and faith groups with property to developers and government to build affordable housing.
“We’re still seeing high prices,” James said. “Vacancy rates are still a challenge. The hope is that will begin to moderate the market.”
The Real Estate Board of Greater Vancouver reported last month that the average benchmark price for all properties in Metro Vancouver was just below $1.1 million, an increase of 16% since March 2017. The average price for a detached single family home in Metro Vancouver was $1.6 million.
Rental vacancy rates in the areas around Vancouver, Victoria, and Kelowna are below 1%.
Cameron Muir, chief economist at the B.C. Real Estate Association, said that the plan to compile data to track presale condominiums is long overdue.
“It’s a data gap that needs to be addressed and I think this is a good move to better understand the presale condo market,” Muir stated, adding the legislation would force the reporting of the condo flips and allow the government to collect the tax.