British Columbia is known for being fairly rainy, but it’s the taxpayers who are “making it rain” of late. Authorities in British Columbia revealed Tuesday that they ran a surplus in its just-oncluded year, while also projecting surpluses through 2019.
The fiscal year concluding at the end of March is currently showing a surplus of C$377 million, with the year beginning in April projected to bring another C$264 million. It’s expected to then tick up to C$287 million in 2017-18 and jump again to 2018-19 in 2018-2019.
Housing Market Driving Surpluses
These surpluses are being driven by a BC economy that continues to perform well, particularly in the red-hot housing market. Of course, one developer’s booming housing market is another resident’s nightmarishly expensive real estate economy. Vancouver was ranked as the third least affordable housing market in the world in Demographia’s 2016 study of housing affordability, and home prices in metro Vancouver have jumped 45-70% in the last five years with prices in multi-family housing increasing 15-40% over that same period.
The new budget moves to alleviate some of these issues by eliminating taxes on more affordable properties and increasing it on the more expensive ones. The current rate sits at 1.00% for the first C$200,000 and 2.00% thereafter. In the new budget, homes available for C$750,000 or less will be exempted from the tax, saving buyers up to $13,000, while a new tier with a 3.00% rate opens up at C$2 million. The goal here is to promote new home starts at lower prices to increase the levels of affordable housing.
The budget also includes a requirement for buyers to reveal their nationality, a move intended to curtail a potentially massive market of foreign buyers using the Vancouver housing market as an investment vehicle. It remains a subject of some debate, but revealing the nationality of buyers should allow the government to better track these transactions.
Using Today’s Windfall to Foster Future Economic Growth
As for how Vancouver plans on spending its newfound windfall, the plans are varied. Some C$27 billion in infrastructure spending is planned over the next years, including major upgrades to schools, hospitals, and public transportation. That’s simply keeping pace with the rapidly expanding population boom, expected to reach 4.74 million in 2016, that’s also driving the boost in housing prices.
There’s also a planned investment of C$100 million into a “Prosperity Fund” that’s intended to help BC build economic growth over time. Despite the surpluses, there remains reasons for concern. With growth slowing overseas, exports are expected to slow, particularly of coal and timber, which are major industries in BC.
“We are leading the country in terms in economic growth and confronted around us by a measure of economic uncertainty,” said Finance Minister Michael de Jong.
The growth of the liquid natural gas (LNG) industry also appears to be in jeopardy as plans for the construction of three LNG terminals in BC by 2020 have recently seen delays.
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