British Columbia’s real estate market has been on the upswing for the past few years, but economic observers have warned that the province’s economy is now heavily reliant upon housing for revenue, and that the government’s stated commitment to cool down this sector comes with various risks.
Real estate revenue comprised a sizeable segment of the 2016/17 public accounts released last week, which recorded a $2.7 billion surplus. Observers attributed this to a 32-per-cent growth in the revenue associated with the property transfer tax (around $2 billion in total revenue last fiscal year).
According to University of Victoria economist Lindsay Tedds, these developments indicated that in its current form, the B.C. economy is innately tied to the performance of the housing segment.
“Much as we like to point to Alberta being so reliant on their oil revenues, we are very reliant on the real estate industry to prop up our economy,” Tedds told CBC News.
UBC professor of economics Tsur Somerville said that aside from property tax revenue, the red-hot housing market is providing other sources of fiscal strength such as home builders’ personal income taxes, real estate agents’ income taxes, and purchase taxes on furniture and home appliances.
“If you slow down the real estate industry, because it’s an overly large part of our economy, you're going to have some repercussions,” Somerville warned, in reference to the B.C. NDP’s latest promise to moderate the province’s housing market.
“It’s not a healthy situation to be that dependent on real estate, so the adjustment is going to be a little bit painful no matter what happens,” he added. “It’s hard for government to come in and change markets. When you try to blow up a market, you really don't know where things are going to go.”
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