Vancouver to implement vacancy tax on empty homes and condos
BC government has cleared the way for Vancouver to impose a vacancy tax on empty homes. Vancouver plans to impose the tax by early 2017. It will make it the first major city in Canada to implement such a penalty amid skyrocketing rents and growing concerns about foreign investment and speculation.
Mayor Robertson noted that a city study concluded there were about 10,800 empty residential units homes in the province, almost all condos, as of 2014.
Similar tax was introduced in London on ‘ghost homes’ back in 2013. As a result, one third of absentee owners began renting out their flats. However the majority of absentee owners left their flats vacant. The annual appreciation is way more than the ’empty home tax’.
So what effect will this new tax have on Vancouver’s real estate market?
In my opinion there will be no significant effect. Overseas millionaires and billionaires would not care about a couple of thousands of dollars per year in taxes. Vancouver has one of the lowest property taxes in the world. Even after additional vacancy tax it would still be quite affordable.
Empty home tax would be very hard to enforce. You could always have one of your family members “live” in the unit for a couple of weeks every year.
Other municipalities have not agreed to such tax yet. If Vancouver has an “empty home tax” a potential investor can alway buy in Burnaby, or North Vancouver, or Richmond, or… you get the idea.
In the best case scenario a small portion of the absentee owners will decide to rent out their units. Which should stimulate the rental vacancy rate. Currently the rental vacancy rate in Vancouver is 0.6 percent. Housing experts say a healthy vacancy rate is 3 per cent to 5 per cent.
In summery empty home tax will not have any significant effect on the real estate market in Vancouver. It might have a slight effect on the rental vacancy rates, but even that is questionable.
NOTE: This article represents my personal opinion. Do your own independent research before taking any actions.