British Columbia’s speculation tax, which slaps a hefty penalty on out-of-province buyers, is seen as a threat to the seasonal property market in B.C.’s Okanagan, but could prove a boon to the Alberta resort town of Canmore.
The new non-B.C.-resident tax could gut the Okanagan economy, warns Scrap the Speculation Tax, a new Kelowna-based business coalition.
Starting in 2019, Canadians from outside B.C. who have seasonal properties in the province that are subject to the tax will pay a 1 per cent levy on the assessed value of the property. Homes that are left vacant for six months or more in a year are subject to the tax.
In Kelowna, a popular spot for vacationing Albertans, a waterfront cottage can easily reach $1 million, which would translate into a speculation tax of $10,000 annually if it were left vacant half of the year.
The numbers are not lost on Frank Kernick, developer of Spring Creek in Canmore, Alberta, who is marketing the advantages of buying east of the Rockies.
“We’ll provide the B.C. wine; you save the seven-hour drive to Kelowna,” said Kernick. “Anyone, Albertan, British Columbian or Canadian, who buys a condo in our White Spruce Lodge in the spring or summer of 2018 will receive a free case of B.C. wine from us and an enormous saving on their tax bill by buying in Alberta.”
The wine giveaway is a nod to a short-lived Alberta ban on imports of B.C. wine, part of a simmering trade war between the two provinces. The trade war is tied to B.C.’s attempt to slow or stop the Trans Mountain pipeline expansion, which would bring more Alberta oil to tankers on the West Coast.
But Kernick noted that Alberta has more to offer than a break on speculation taxes.
With higher B.C. property tax rates for out-of-province owners, it makes sense that buyers will gravitate back to “affordable, welcoming Alberta,” Kernick noted.
Alberta residents also don’t have to pay B.C.’s 7 per cent sales tax on their daily purchases, which makes owning a second home in Alberta even more attractive, he added.
However, the average condominium apartment price in B.C.’s central Okanagan is $324,500, well below Canmore’s condo average of $509,000.
Kelowna’s real estate industry is concerned about how the new speculation tax will affect the market and the overall economy, said Okanagan Mainline Real Estate Board president Tanis Read.
Read points to the legions of non-B.C. residents, primarily Albertans, who own properties in Kelowna who will now be subject to B.C.’s speculation tax.
“This will force out-of-province owners to either contribute dramatically more to B.C. government coffers or rent out their homes to avoid the levy – effectively taking away the owner’s ability to use their own home,” Read said.
“It is our responsibility to speak up and educate consumers about how the new speculation tax will negatively affect jobs in our community,” said Justin O’Connor, president, Canadian Home Builders’ Association Central Okanagan, a member of Scrap the Speculation Tax.