The Property Flipping Tax is a sliding-scale tax, with a 20% tax on those properties that are resold within a one-year window and a lesser tax on any sale within a two-year time frame. The provincial government aims to levy this tax on property flippers who purchase and sell a property within two years. The tax targets property flippers who are solely looking to make a profit. According to the Bank of Canada, approximately 3.1% of homes in Vancouver and Victoria are sold within one year. If you consider the charts above, courtesy of BCREA Economics, the participation of homes sold in B.C. throughout a one-year time frame is, on average, between 2.5-3.1%. The stats do not delineate between those in the business of flipping properties and those with valid reasons for a resell within one to two years.
There are many reasons families decide to move within a two-year time frame, and the majority are for purposes that are exemptions to the flipping tax. This begs the following question: What are exemptions to this "flipping tax"? Exemptions that could apply include a death in the family, an addition to the family, employment relocations, martial breakdown, default or bankruptcy, illness or disability, destruction of the property, expropriation of the property, and more. Please visit the government of B.C.'s website: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
What are the effects of the flipping tax? The BCREA Market Intelligence Report notes, "In other jurisdictions where similar rules exist, such as the United States, Australia, New Zealand, and Singapore, the effect of such taxes on prices remains ambiguous; the evidence is mixed and inconclusive, and if an effect exists, it is minor."
What can be said about the impact on the market on sellers who hold off listing their homes? The impacts remain to be seen. However, rational thought would indicate that if sellers are deferring their listings for a one—to two-year time frame, this would result in a reduction of listings. This would lead to a resultant price increase for the limited inventory as there would be even fewer homes, albeit not a huge amount, for purchasers to compete for.
Although the government feels that taxing the small percentage of homeowners who truly "flip" their properties is a great way to gain additional tax revenue, the focus should remain on supply-side measures and programs that create the much-needed housing. Those "flippers" who are taking risks with their capital to build additional housing units for rental stock are not the ones who should bear the brunt of the government's short-sighted policies. On the other hand, those owners who are speculative with their purchases, looking to make a quick buck, and artificially inflating the market pricing should bear the tax.
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