VANCOUVER (NEWS 1130) – Vancouver homeowners probably won’t like it, but the city’s proposed property tax hike could be another blow to speculative demand in local real estate.
Economist Tom Davidoff with UBC’s Sauder School of Business says the potential 8.2 per cent property tax increase included in Vancouver’s draft budget for 2020 could help the housing market.
“As Vancouver raises property tax, of course homeowners aren’t going to like that, but I think there is a bit of a side benefit of chasing off whatever speculative demand has survived the empty homes tax and foreign buyer taxes,” Davidoff says.
When real estate investors look to park their money, they want properties with low holding costs. But between the Empty Homes Tax, the speculation tax and now this increase, Vancouver is becoming increasingly less attractive for speculators, he says.
“Money from out of town looking for a return without bothering to rent a place out, that money’s almost gone from Vancouver. You have to think, but higher property taxes are going to make it even less attractive,” Davidoff says. “Maybe investors start to infer ‘Jeez, I’m at risk of starting to pay significant property taxes if council keeps this up.’ I think this is a step towards purging what remains of the pure speculative demand in Vancouver.”
Still, he notes property taxes here remain low at a fraction of home values, particularly when compared with most American cities.