New data from Statistics Canada suggests “home flipping” has played a small, yet lucrative role in B.C.’s housing market.
The practice of buying a home and quickly re-selling it for a profit, with or without improvements, has been targeted as a potential driver of rising prices in B.C.’s red-hot market.
Earlier this year, the provincial government unveiled a new home-flipping tax it said will target housing speculators.
The measure, which kicks in Jan.1, will hit most people who sell a home within a year of buying it with a 20 per cent tax on profit. Exceptions will be allowed for unavoidable life changes such as death, divorce and job relocation.
But the StatsCan data, collected between 2019 and 2021, suggests such transactions make up a tiny fraction of sales in the province.
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The federal agency found just four per cent of condos and fewer than three per cent of detached homes sold in 2021 were owned for less than a year. For all property types between 2019 and 2021, 2.8 per cent were flipped, it said.
However, the data showed sales on those flipped properties were generally lucrative.
It found the median price of a condo bought in Metro Vancouver in 2020 was 4.5 per cent lower and of a detached home was 20.1 per cent lower than similar properties that sold that year.
When those properties were subsequently flipped, detached home sellers picked up a median 29.9 per cent gross profit, while condo sellers made a median 16.3 per cent gross profit.
Andrey Pavlov, a professor of finance at SFU’s Beedie School of Business, said the data shows flipping accounts for a “tiny number” of sales, about half of which would have happened anyway because of people’s changing life circumstances.
Those sales wouldn’t be captured by B.C.’s new tax.
He argued the data shows the province is focused on the wrong problem.
“We have been attacking investors and speculators for a number of years. It hasn’t worked. I don’t think it was ever going to work,” he said.
“Maybe there is a different problem here and the problem is we don’t build enough houses.”
B.C.’s tax will be retroactive to the 2023-2024 tax year, and will apply at a lower rate to homes sold within two years of purchase.
The B.C. government says the tax is intended to ensure people who want to buy homes to live in aren’t competing with speculators who are seeking to turn a profit.
The Finance Ministry forecasts the new tax will deliver “modest” revenue of about $40 million and affect about 4,000 sales annually.
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