I recently gave a presentation to a group in the real estate and financial services space on what real estate could look like in ten years. I called the presentation “Agent 2032” on an outlook of real estate ten years into the future. I shared how technology would be an absolute game changer, the role of a Realtor®, what value and role a real estate brokerage would play, and how Government would involve in all things real estate in 2032.
Each one of these is extremely interesting and I could spend a great deal of time sharing on each one of them. However, the one I think is most fascinating to you the reader is the latter, Government involvement.
First, this is not about any political party or sharing my political views or party preference. What I will share is where I believe all political parties in BC and Canada are trending. Government in general needs to find ways to find money to fund everything from infrastructure, maintenance, culture to social programs, and of course pet projects. The challenge for any government is where they are going to find the money for tomorrow and more importantly as we move into the future, 2032, to fund these important and not so important projects.
They are going to find the extra money through the real estate market in my opinion. Real estate and construction account for nearly 30% of BC’s GDP. To put this in comparison, Alberta’s oil and gas industry GDP is approximately 26%. Literally, the BC government is relying on real estate and the construction business to float the boat, even more so than Alberta is expecting from oil and gas. The graph is shocking as to where and what make this province run. See below.
Now that we know where the money is, let us look to who wants a major piece of it, the government. Today the government taxes real estate significantly. There are the traditional property taxes of course, that’s a given, we also have the property transfer tax (PTT). PTT is a huge source of income with an estimated $2 billion dollars collected annually by the province. This huge amount of money is not earmarked for anything other than being dumped into the general account for the government to spend as they see fit!
The PTT has been around since 1987, but what is alarming, is the government’s desire to continuing to increase the PTT rates. Meanwhile property prices have risen significantly since 1987, which would bring in more tax money through PTT.
As we look into the future and 2032, we will see more taxes. Currently, all investment properties are taxed federally as capital gains upon a sale being triggered. I expect the same capital gain tax being applied to our residential properties in the future or 2032.
However, I believe these taxes will not satisfy the appetite of a tax hungry government. Again, I am not choosing any political party, just saying governments of the future will continue to tax real estate in ways we have not seen today or have even thought of. For instance, we all know what ICBC is, how about RCBC (Real Estate Corp of British Columbia). Be prepared for new and complex tax concepts as the government convinces you and I that these are good for the province. They will disguise these taxes by promoting the tax money will be used for funding roads, parks, affordable housing, and solving homeless issues to name a few.
The taxman will disguise his tax grabs in various ways. However, something we can be clear on, the BC taxman of 2032 will run this province on the backs of real estate and construction.
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