Flipping Tax, Yes Another Tax on your property.
During Covid the housing sale and rental prices increased dramatically. The result of this has caused all levels of government to step in and try to reduce the cost of housing and the most recent way for the BC government is to implement another tax for home sellers.
The anti-flipping tax came into effect Jan 1, 2025. What is the flipping tax? This tax is to help reduce speculative house buying and selling. What is speculative house buying? This is when someone buys a home and in a short period of time, turns around and sells the property for a profit due to the increase in value in the market.
The new flipping tax is making it a requirement of owners to hold onto their properties for a minimum of two years. If you purchased a property in 2024 and sold it in 2025 you will be subject to the flipping tax. The tax rate is 20% of the profit on the home. If you bought your property in 2020 and sold it in 2025 then you would not be subject to the flipping tax. The intent of the tax is to encourage people to hold the properties for a few years before selling the property.
How is this going to affect the current rental market?. A few things could happen.
This tax could cause people to delay buying a property to live in as they are unsure what their short term future is and don’t want to be in a position where they must sell and pay the flipping tax. It may delay current owners who recently bought from selling their property as well. This may cause those people to seek a place to rent which would help the rental market and it would put more downward pressure on sales decreasing the price to buy a property.
When there are less options for selling your property, the owner will try to rent the property which will add more inventory to the market. We anticipate the rental quantity will increase in the short term as there are many developments currently under construction that will be completed in the next year and those owners would be subject to the flipping tax. They will look to the rental market for their property increasing supply which will decrease the demand.
The market could go the other way as well and many people may choose this is a good time to buy due to the above pressure pulling down the prices, making it more affordable to own instead of renting. A strong rental market coincides with a good sales market.
We anticipate this is going to create an initial increase in product entering the rental market affecting the rental prices. We are not sure how long that will affect the market and how far it will push rental rates down. We anticipate it will have an effect on the market for at least two years. The tax will eventually slow down new construction as most new construction is developed with investors in mind and they may opt out of purchasing products if they are required to hold them for a minimum of two years which eventually will slow development in the market place. After that there will be a decrease of products entering the rental market.
We always advise clients who are investing in a rental property that to realize gains you need to hold the property for three to five years, more like five in slower growing or declining markets like we are in today. In that case it would not affect the investor who holds the property for five years before disposing of it.
For more information on the anti- flipping tax visis the BC government website in the link below.
https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
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