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If you have been trying to keep up with the rule changes related to real estate in Canada and BC in the last few years, your head may be spinning and that gut-building sense of overwhelm is perfectly normal because it has been a churning time to stay on top of what could be impacting you as a buyer, seller and property owner in these times.
Gone are the days when one could hold true and strong to a specific set of rules and regulations with certainty that they were solid and steady. It seems now that every turn around the corner equals new rules or updates to existing rules. So I figured that it would be useful to give a brief highlight of some of the bigger changes in the last few years that can impact those interested in real estate here in BC/Canada.
BC Property Transfer Tax (PTT): For most people it is still the same, you pay 1% on the first $200,000, 2% up to $2M and 3% over $2M. What has changed is that First Time Home Buyers (FTHB) are now EXEMPT from paying PTT on the first $500,000 if the purchase price is $835,000 or less (the exemption used to only apply for FTHB if the purchase was $500,000 or less). For example, if you wanted to buy a home for $830,000, as a FTHB who meets the exemption criteria, you would be exempt from PTT on the first $500,000 of value and you would pay 2% PTT on the remaining $335,000 of value, which effectively saves you $8,000 in PTT on that first $500K. Big time savings!
New homes built with a value up to $1.1million are also exempt from PTT (that’s an increase up from the $750,000 that it was previously), BUT, don’t forget that you always pay 5% GST on brand new homes. So you save some cost on PTT, but you may equal out or pay more with the GST.
If you buy on First Nations land (with some exceptions), you are also exempt from paying PTT.
BC House Flipping Tax: This is new. If you sell a home after January 1, 2025 and you have owned it for less than one year and you make a profit, you will pay 20% of your profit to the Provincial Government. If you sell it in less than 2 years after purchasing it (say between 365 to 730 days), you will also pay the Flipping Tax on a sliding scale, starting at 20%. There are exceptions for job transfers, major life changes, etc – but essentially they are trying to curb the quick buying/renovating/selling of homes for a profit. Say goodbye to the days of using real estate as a vehicle to generate wealth through the sweat equity of a quick fix and flip.
Foreign Buyer Ban: In 2022, the Federal Government introduced a ban on all non-Canadians (I.e. foreign buyers) for buying property in Canada (with some exceptions and exemptions) until the end of 2024. In 2024, the federal government declared an extension of this ban to January 1, 2027.
Short-term Rental Ban: This ban took effect May 1, 2024. It bans all short-term rentals in BC in properties that are not in your primary residence (unless you are a city/town under 10,000 people or have over a 3% vacancy rate). That means all the strata properties that are/were purpose-built for short-term rentals (ie condo buildings in Kelowna called Brooklyn, Playa Del Sol, Caban, Aqua, Discovery Bay, etc) can not be used for that purpose anymore. Needless to say, this new ban has created huge angst for many people that invested most or all their retirement funds into these projects. Interestingly, you can now rent out LEGAL suites as short-term rentals, which you couldn’t do before. Kelowna decided to take this Provincial Ban one step further, and is banning ALL short-term rentals within it’s city limits, even within your primary residence, except for the current 489 Short-Term Rental license holders in existing single family homes. Between the negative affect of natural disasters, like forest fires, on our local Okanagan tourism industry, this highly media-publicized and dramatized rental ban has added to the drop in desirability of the valley and has had a notable affect on tourism, student housing and traveling/interning medical & other professionals that frequented AirBnB type accommodations. The other interesting thing to note is that the municipalities of West Kelowna and Lake Country did not follow Kelowna’s lead in their extra ban on primary residences and the City of West Kelowna is currently exempt from the provincial ban because they have a vacancy rate of over 3%. Maybe West Kelowna will see in an increase in sales and property values, only time will tell!
Insured Mortgage Cap Price Change
The price cap for insured mortgages (any mortgaged home purchase with less than 20% downpayment) will be boosted, for the first time since 2012, moving the marker from $1million up to $1.5million; this will allow more people to qualify for a mortgage with less than 20% downpayment up to that threshold.
Mortgage Amortization Extensions
The Federal Government recently announced that it is going to expand it’s 30-year mortgage amortization schedule to include first time home buyers and anyone purchasing a newly built home. This will allow for lower monthly costs for these buyers and greater affordability on the short term scale, however the overall lifetime cost of the mortgage and the interest paid will be higher in the long run. It’s important to weigh the pros and cons of what this means for each buyers individual circumstance to see if this higher overall cost makes sense for the shorter term affordability gains.
New Zoning Changes
BC’s government announced the approval of Bill 44 in June 2024, which requires municipalities with at least 5,000 people to change their zoning bylaws to permit up to four units on a standard residential lot, and up to six units on a standard lot near public transit. There are 191 municipalities in B.C., of which 86 have fewer than 5,000 residents. Of course, this doesn’t mean that if you have a tiny 0.9 acre lot that you can go and put 4 units on it. This new legislation permits densification of previously single-family zoned lots, provided that they meet the local, municipal bylaw for construction of a higher density. This presents a bit of a pickle for appraisers and evaluators as now when a lot is assessed based on it’s “highest and best use” there is a lot more research and “speculating” that has to be taken into account, not just looking at what is currently existing there. Good luck getting an appraisal these days!
Speculation/Empty Homes tax: This one isn’t new, but is a good reminder, to be sure… You pay 0.5% of your property’s assessed value to your provincial govt each year if you don’t live in your home OR is you don’t have it rented out at least 6 months of the year. If you are not Canadian, you pay 2% a year. You must fill out a Speculation Declaration form online by March 31st each year in order to be exempted- so don’t forget to do this!
WOW!
These are just a few of the major changes that impact our local and national real estate environments today and it is even more important these days to ensure that you are working with licensed and diligent professionals that are staying on top of the rule changes that may affect you in a large way when you are investing in your future.
If ever you want to discuss the sale or purchase of Okanagan real estate, I would be happy to connect and chat and dive in to the different scenarios that make the most sense for you!
