Home sellers awaken this spring, bringing much-needed inventory to the housing market

While Metro Vancouver home sellers appeared somewhat hesitant in January, new listings rose 31 per cent year-over-year in February, bringing a significant number of newly listed properties to the market. 

Greater Vancouver REALTORS® (GVR) reports that residential sales in the region totalled 2,070 in February 2024, a 13.5 per cent increase from the 1,824 sales recorded in February 2023. This was 23.3 per cent below the 10-year seasonal average (2,699).

“While the pace of home sales started the year off briskly, the pace of newly listed properties in January was slower by comparison. A continuation of this pattern in February would have been concerning, as it could quickly tilt the market towards overheated conditions,” Andrew Lis, GVR’s director of economics and data analytics said. “With new listings up about 31 per cent year-over-year in February, this will relieve some of thepressure that was building in January and offer buyers more choice as we enter the spring and summer markets.” 

There were 4,560 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in February 2024. This represents a 31.1 per cent increase compared to the 3,478 properties listed in February 2023. This was 0.2 per cent below the 10-year seasonal average (4,568). 

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 9,634, a 16.3 per cent increase compared to February 2023 (8,283). This is three per cent above the 10-year seasonal average (9,352). 

Across all detached, attached and apartment property types, the sales-to-active listings ratio for February 2024 is 22.4 per cent. By property type, the ratio is 16 per cent for detached homes, 27.9 per cent for attached, and 25.9 per cent for apartments. 

Analysis of the historical data suggests downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months. 

Even with the increase in new listings however, standing inventory levels were not high enough relative to the pace of sales to mitigate price acceleration in February, with most segments of the market moving into sellers’ territory,” Lis said. “This competitive dynamic has led to modest price growth across all market segments this month, but it’s noteworthy that benchmark prices remain below the peak observed in the spring of 2022, before the market internalized the full effect of the Bank of Canada’s tightening cycle.” 

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,183,300. This represents a 4.5 per cent increase over February 2023 and a 1.9 per cent increase compared to January 2024. 

Sales of detached homes in February 2024 reached 560, an 8.3 per cent increase from the 517 detached sales recorded in February 2023. The benchmark price for a detached home is $1,972,400. This represents a 7.2 per cent increase from February 2023 and a 1.5 per cent increase compared to January 2024. 

Sales of apartment homes reached 1,092 in February 2024, a 17.7 per cent increase compared to the 928 sales in February 2023. The benchmark price of an apartment home is $770,700. This represents a 5.6 per cent increase from February 2023 and a 2.5 per cent increase compared to January 2024. 

Attached home sales in February 2024 totalled 403, a 10.1 per cent increase compared to the 366 sales in February 2023. The benchmark price of a townhouse is $1,094,700. This represents a 4.2 per cent increase from February 2023 and a 2.6 per cent increase compared to January 2024. 

Sara Esmi

About the New BC Flipping Tax

Premier David Eby's NDP government has introduced a proactive measure to address speculation in British Columbia's real estate market with the unveiling of the "BC Home Flipping Tax."

Aimed at those prioritizing profits over people, this initiative seeks to bolster housing supply while generating essential tax revenue. Effective January 1, 2025, the tax will target profits from selling residential homes or residentially zoned land within two years of purchase. It employs a progressive scale, starting at 20% in the initial year and decreasing to 10% after 18 months, ultimately phasing out after two years of ownership.

Key Features of the BC House Flipping Tax

Tax Rates:

• The tax rate starts at 20% for profits made within the first year of ownership.
• It gradually decreases to 10% after 18 months.
• After two years of ownership, the tax reduces to zero.

Exclusions:

• Sales of primary residences within two years can exclude up to $20,000 from taxable income.
• Exceptions are provided for circumstances such as divorce, death, illness, and relocation for work.

Appeals and Documentation:

• Procedures for appeal and required documentation are currently under review.
• Detailed guidelines and necessary forms are anticipated to be available after the legislation's passage.

Effective Date:

• The tax applies to properties sold from January 1, 2025.
• It applies retroactively, irrespective of when the property was purchased.

In recent years, British Columbia's real estate market has seen significant growth, attracting investors looking to capitalize on opportunities for profit. However, with the introduction of the new BC flipping tax, investors need to be aware of the implications this may have on their investment strategies.

Understanding the BC Flipping Tax

The BC flipping tax, officially known as the "Speculation and Vacancy Tax," is designed to target properties that are being quickly bought and sold for profit, often referred to as "flipping." Implemented as part of the government's efforts to address housing affordability and speculation in the market, this tax aims to discourage speculative activity and stabilize housing prices.

Who Does It Affect?

Investors and property owners need to be aware of how this tax may impact their investment decisions. The tax applies to residential properties in designated regions of British Columbia, including Metro Vancouver, the Capital Regional District, the Fraser Valley, and certain regions of Vancouver Island. Properties subject to the tax include those that are left vacant or not used as a primary residence for the majority of the year.

Key Considerations for Investors

1. Tax Rates: The BC flipping tax is levied annually, and the rate varies depending on the owner's residency status and the assessed value of the property. Non-resident owners and satellite families may face higher tax rates compared to British Columbia residents.

2. Exemptions and Rebates: While the tax may apply to certain properties, there are exemptions and rebates available under specific circumstances. For example, properties used as a primary residence, rented out long-term, or subject to certain rental restrictions may be eligible for exemptions or rebates.

3. Impact on Investment Strategies: Investors need to evaluate how the BC flipping tax may affect their investment strategies. Those considering short-term flipping or speculative activities may need to reconsider their approach and explore alternative investment options that align with the tax regulations.

4. Compliance and Reporting Requirements: It is essential for investors to understand their obligations regarding compliance and reporting. Failure to comply with the tax regulations may result in penalties and additional costs, highlighting the importance of staying informed and up-to-date with the requirements.

Seeking Professional Guidance

Given the complexity of the BC flipping tax and its implications for investors, seeking professional guidance from real estate experts, tax advisors, and legal professionals is crucial. These professionals can provide valuable insights, help navigate the tax regulations, and develop investment strategies that optimize returns while ensuring compliance with the law.

Conclusion

The introduction of the BC flipping tax underscores the government's commitment to addressing housing affordability and speculation in the real estate market. Investors need to be aware of the tax implications and adjust their investment strategies accordingly. By staying informed, seeking professional guidance, and understanding their obligations, investors can navigate the changing landscape of the British Columbia real estate market effectively.

Sara Esmi