Investors react to ‘flipping’ tax proposal

Real estate marketer Bob Rennie’s suggestion to impose a tax on those who flip properties will certainly deter some speculator-buyers, say experts, but not all.

“The word ‘speculative’ says it all,” said Randy Dyck, an investor and real estate agent at Eximus.

“The buyer is taking a risk or banking on the market moving up in value. It’s a business decision, one that he/she could win or lose depending on the future market conditions. In the end, ‘The Market’ will determine who the winners and losers are. I guess we could call it the speculative market cycle tax.”

In his annual address to the Urban Development Institute on Friday, Bob Rennie, owner and founder of Rennie Marketing System in Vancouver, said that one way to put the brakes on an overheated housing market fueled by speculation is to tax people who flip properties.

“What if we were to look at a tax on people who sold something within a month of buying it, within three months of buying it, or six months of buying it, or nine months of buying it and then had a declining tax?” Rennie asked during his presentation.

If a speculator tax was imposed, it would likely impact less than half of condo investors in Canada, since CMHC’s 2014 Condominium Owners Survey, published last week, found that 52 per cent of respondents said they anticipate holding their last secondary unit for more than five years.

Another consideration is that these types of taxes, such as the land transfer tax in Toronto, actually hurt the end-buyers rather than the investors themselves.

“Although everyone pays the extra tax it was originally thought to hurt flippers the most, however, costs in an up-trend market are ultimately passed down to the consumer,” said Shawn Arshad, an investor who flips properties in the GTA.

Peter Kinch, an investor and mortgage broker in Vancouver, also disagrees with Rennie's suggestion. "I’m not certain that speculators and flippers are the real issue," he said. "The market will control the actions.

"It will penalize the speculators who are simply flipping and reward the savvy investor who does their research. Let the market take care of itself – not the government."

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  • by MFenn 2015-05-26 12:56:20 PM

    'Put up taxes and you'll feel good' is not a sound economic or investment solution.

  • by Peter 2015-05-26 1:44:17 PM

    To be fair, there should be a flipping loss claim allowed by CRA.

  • by David 2015-05-26 3:59:12 PM

    There already are plenty of tax implications.

    If you flip a new property you have to repay the HST rebate. If you don't, and you get caught, you have to pay it back plus a penalty. Problem is that builders were turning a blind eye to this practice, but now (apparently) the government has many new tax inspectors to police the cheaters.

    Also, if you do this as a business you could have the profit taxed as income rather than capital gains (double the taxable income) if the CRA sees this as a business rather than a hobby!

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