With the new NDP government in British Columbia and their focus on escalating property values and tightening rental markets, some big changes are on the scene. Foreign investors and “satellite families” have been investing heavily in certain areas of British Columbia, contributing to double digit price increases per year over the past decade. This has been contributing to the problem of younger British Columbians not getting into the residential market, or paying for escalating rents due to people not being able to transition out of the rental market into home ownership.
The newly announced tax situation has a number of things to be aware of, but at the same time, this presents a number of areas of opportunity for those who act quickly. The “Foreign Investor Tax” has gone up from 15% on residential to 20% on residential, and has expanded from Greater Vancouver to also Greater Victoria, Greater Nanaimo, and Greater Kelowna areas. A separate “Speculation Tax” has also been added in these areas. It applies to owners who do not rent out a property for at least 6 months per year. It is levied at .5% of assessed value for British Columbia residents, 1% of assessed value for other Canadian residents, and 2% of assessed value for non-Canadian residents. British Columbia residents are also credited with no tax levied on the first $400,000 of property value and a $2000 British Columbia income tax credit on anything above that. Obviously the way to avoid the taxes as a foreign investor is to not buy residential in the above areas, or rent out your property for at least 6 months per year.
A “hotspot” we would like to bring to your attention is Penticton in the Okanagan wine country valley. It has been left out of the taxed areas because it is smaller and does not have the tight rental market that is experienced nowadays in Kelowna, 60 km north. It also does not have the big city feel of Kelowna with Penticton’s population of 50,000 versus 200,000 for Kelowna. The Okanagan valley, with its string of lakes populated by small towns and cities from one end to the other, has long been the fruit growing capital of Canada. Recently, it has also been referred to as “Napa north”, as it has gained accolades as a wine producing region. Being roughly equidistant from Vancouver and Alberta, the valley benefits from being an easy day’s drive from either.
Penticton itself is framed by beautiful swimming lakes on both the north and south ends, along with mountains and vineyards on both the west and east sides. The Okanagan and Penticton has long been a summer vacation destination for western Canada, with everything from award winning golf courses, to sunny beaches, to fabulous boating, as well as a host of other tourism related attractions. The fact that the thermometer can push 40 degrees Celsius in the summer is part of the allure of living in the only area in Canada that has parts of it classified as true desert. In the winter, the snows come and the valley has several world class mountain resorts with powder skiing and boarding. All of this adds to the opportunity of investing in a beautiful small town that has all of the amenities and services but none of the prices and congestion of nearby Kelowna. Not having to worry about the added taxes is cream on the top. However, because of its limited land space due to the lakes and mountains, the deals can’t last forever. In 2018 the average house price in Penticton is $525,000 and in Kelowna is $725,000. The average condo price in Penticton is $285,000 and in Kelowna is $375,000. We feel the 45 min drive between the two makes these places virtually identical in location but much different in terms of cost and feel.
If this opportunity catches your imagination, your team at Maude, MacKay & Co. Ltd. would be glad to assist you in achieving your dream of home ownership in an idyllic location. Please get in touch!
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