B.C. Introduces New Proposed Home-Flipping Tax

The provincial government tables legislation to enact a 20% flipping tax on homes sold within the first year of ownership.

By Brett Surbey | 4 minute read

The B.C. government introduced a proposed flipping tax on homes sold within two years of being purchased as part of its 2024 budget.

On April 3, 2024, the B.C. government introduced legislation enacting a flipping tax on homes purchased and sold within a two-year timeframe to discourage investors from buying homes only to turn a quick profit.

The tax is separate from the federal property flipping tax and, if approved, takes effect on January 1, 2025.  It will subject any homes purchased in 2023 and beyond that are sold within one year to a 20% tax. Homes sold between 366 days and 729 days after purchase will still be taxed, but at a lower rate. Once a property is owned for 730 days or more, the tax no longer applies.

The proposed legislation contains a number of exemptions based on where the property is located and major life circumstances that may have led to the sale of the property, such as the death of a family member or divorce. The law includes a “primary residence deduction” if a homeowner sells their primary residence within two years. They may be able to claim a deduction of up to $20,000 if they owned the property for at least one straight year, and the property includes a housing unit that was lived in by the owner.  

“I don’t think that this tax is necessarily going to fix anything [in terms of adjusting the market] — it’s just going to disincentivize,” says Steve Karrasch, a REALTOR® with MacDonald Realty in Surrey. Karrasch believes that if markets heat up again due to factors like lower interest rates and high population growth, the tax likely won’t “calm the market down.”

Karrasch adds that the major market effects being felt by homebuyers due to interest rates and the higher costs of mortgages and rental rates could dilute any potential changes the new tax could bring.

Karrasch is not the only one with doubts about the tax’s effectiveness. The B.C. The Real Estate Association (BCREA) released a report on the provincial flipping tax, which weighed the benefits and consequences of the tax. They estimate that “the flipping tax will lower sales in BC by 1.7 per cent, but will have minimal impact on home prices.” This estimation is the result of policy simulations based on BCREA’s “Real Estate Policy Analysis Model,” which incorporated short-term, long-term and principal residence homebuyers into their analysis. 

While the low impact on housing prices does not necessarily help homebuyers get into the market, BCREA’s report brings up a greater concern. “Depending on how potential sellers react to the tax, home prices could be higher with the flipping tax than with a no-tax baseline, and affordability could deteriorate,” the report states. “In fact, our estimates show that a 5 to 10 percent decline in new listings due to the tax would negate any positive impacts on affordability from the tax.”

Although the tax has been met with criticism, Karrasch believes the government has done a good job identifying many of the tax’s unintended consequences. “They’ve considered it from all angles,” he adds.

One major concern Karrasch had was how pre-sales would be treated under the new law. When a buyer is putting a deposit on a new condo in a hot area like Vancouver or Kelowna, they don’t know where the market is heading. “If the market goes up and you want to cash out … [if you tax those people] that could steer buyers away from buying new construction,” he explains. “No one would buy pre-sales. And then you would have a complete halt to all new construction condos.” The government indicated, however, that the flipping tax will only apply from the contract date — either its effective date or the assignment date if it was assigned — avoiding the issue altogether. 

Karrasch was also concerned that the flipping tax could dissuade flippers or contracts that fulfill an important housing role: improving housing supply through substantial renovations to run-down housing units. “It looks like now the government is introducing substantial renovation exemptions, which is a very good move because we don’t want to discourage fixing up properties.”