Province contemplates new taxes in bid to contain affordability crisis, but realtors believe they miss the root cause
In a bid to bring down home prices to levels within the reach of local residents, the province of Nova Scotia is putting a twist on a measure used in Vancouver to address its own problem of runaway property prices.
According to BNN Bloomberg, Premier Tim Houston has handed down instructions for Finance Minister Allan MacMaster to enact a deed transfer tax to be applied to property purchases made by individuals who don’t pay taxes in the province.
The finance minister has also been asked to impose a $2 levy on every $100 of assessed property value on every non-Nova Scotian taxpayer who owns a property in the province.
While the letter instructing those changes did not specify a timeline for the changes, a spokesperson for the finance and treasury board indicated to the news outlet that work on the measures is underway.
The hope is that the taxes would put a damper on residential investment activity in order to slow down the market and help keep houses affordable for locals. But realtors weighing in on the issue argue the taxes’ impact will be minimal and be of little use in addressing the supply shortage, which they view as the fundamental problem.
“I don't think it's going to deter people,” said Jacqui Rostek, a Nova Scota broker, who believes wealthy property investors will just end up counting the taxes as a transaction cost. “It will work, but mostly for smaller-time investors that are still very much working their jobs and trying to save enough money for a down payment on another property.”
There’s been a trend of surging down payments on Nova Scotia homes over the past few years, according to BNN Bloomberg, particularly as a shift towards remote work has enabled Canadian and international buyers to purchase homes in Atlantic Canada, where prices are more reasonable compared to those in large urban centres.
Based on data from the Canadian Real Estate Association, the average price of a Dartmouth-Halifax home in September was $471,746, almost 23% more than the September 2020 figure of $384,001. In contrast, the average home price in the Greater Toronto and Greater Vancouver areas soared to more than $1.1 million last month.
On the supply side, Canada Mortgage and Housing Corporation recently labelled Halifax as among several high-vulnerability housing markets across the country. In July, CMHC said a Halifax-Dartmouth home would spend an average of just 13 days listed on the market, compared to 45 in January. For the whole of Nova Scotia, the average time spent on the market was 2.2 months at the end of July, compared to 2.9 months in June 2021; that’s also below the long-term average of 7.3 months.
Matthew Honsberger, a Nova Scotia realtor with Royal LePage, also raised concerns that the taxes could be seen as a “punitive” measure that singles out people from outside the province, potentially creating a poor first impression for new homeowners in the province. Beyond that, he said the taxes could have an adverse knock-on effect on already-high rents in the province as property investors pass costs along to tenants.
“That in my mind hurts affordability,” Honsberger said. “It doesn't help affordability.”
