Another year of sliding home values in Metro Vancouver has wiped out $87 billion in home equity wealth, according to a calculation by a property assessment expert.
To some, that’s an outrage.
“People aren’t pleased. They’re very unhappy,” said Paul Sullivan, a senior partner with BCS, a real estate appraisal company, who totted up the total loss.
To others, it’s easy come, easy go.
“It seems a little bit like crocodile tears to put out a press release saying that all of these owners have lost $87 billion, when that’s just an evaluation based on BC Assessment,” said Marc Lee, an economist with the Canadian Centre for Policy Alternatives who has argued governments should increase taxes on real estate wealth.
“They’re not actually out $87 billion.”
A real estate price run-up like no other peaked in 2016 and made many Vancouver homeowners paper millionaires, especially on the increasingly pricey west side. It also put the dream of homeownership out of reach for many residents, and squeezed renters who increasingly faced the threat of eviction.
But for the past few years home prices have been falling: single-family homes started to drop in value and have become harder to sell. At first, the drop didn’t affect lower-priced condos. But this year, the value of all types of housing has fallen, according to BC Assessment data.
Metro Vancouver’s single family residences decreased an average of $149,893, or 10 per cent, Sullivan said, while condo values fell an average of $57,137, or eight per cent. Sullivan crunched the numbers for StepUp, a group of homeowners who oppose the province’s decision to increase property taxes on homes worth over $3 million.
Lee said it’s not yet clear whether a group of taxes introduced since 2016 and aimed at slowing real estate prices are behind the drop. But Sullivan thinks that without a doubt the taxes are to blame — because, he said, real estate prices in Toronto, where homebuyers haven’t faced the same kind of taxes, are still going strong.
Those taxes range from Vancouver’s empty homes tax to the provincial foreign buyer tax (introduced by the BC Liberals, but increased by the NDP in 2018), a provincial vacancy and speculation tax, and an increase in the provincial portion of property taxes and property transfer taxes for homes worth over $3 million.
Sullivan said that far from being just a “paper” loss, the value drop has had dire effects on younger homeowners who bought at the peak of the market and now owe more than their house is worth, meaning they can’t get refinancing or a home equity line of credit.
It’s also affected older homeowners who have lived in their homes for 20 years or more, and planned to use the proceeds of selling their home to fund their retirement.
“So that old couple that’s been living in that house for 30 or 40 years thought they had $5 million to retire, sell the house, live off the money for the rest of their lives,” Sullivan said.
“Instead of having $5 million, now they have $3 million and out of that $3 million they have to buy a home, and then retire.”
Lee finds it hard to sympathize with this situation.
“I think the vast majority of people who live in multi-million homes are extremely wealthy by any standard,” Lee said, arguing that homeowners enjoy a host of favourable tax breaks that renters can’t take advantage of.
Homeowners aren’t taxed at all on their capital gains when they sell their homes, and homeowners over 55 years old can defer their property taxes until they sell the home or until they die and pass the property to their heirs.
“I think we need much higher levels of sympathy for people who are in the rental market, struggling, especially if they’re in a secondary suite or a rented condo, the prospect of eviction at any time,” Lee said, referring to the less-stringent grounds for eviction for tenants in the secondary rental market.
“As a society, we’ve been building a lot more homeownership vehicles like condos than purpose-built rentals or non-market housing.”
While Sullivan blames “democratic socialism” and a tax-hungry NDP government for wiping out real estate wealth, Bernie Burnett wishes the value of her Point Grey home will fall even further.
Burnett said she watched with trepidation, not glee, as property prices climbed higher and higher. Her property was valued at $6 million in 2017, but has since fallen to $4.26 million. Because of the province’s extra property tax on homes worth over $3 million — a tax that rises further for any value over the $4 million mark — her annual property tax is around $22,000.
Property taxes were already around $10,000 a year because of the inflated home values in her west side neighbourhood, home to some of B.C.’s most expensive homes. But the surtax has pushed them into the stratosphere.
Burnett, who just retired from a job at the City of Vancouver, said she bought her house 20 years ago for $850,000 with the help of an inheritance. So far, Burnett has deferred $60,000 of property tax — an amount she feels is hanging over her head as debt. An attempt in 2017 to sell the house fizzled, with no takers.
Lee pointed out that it would take Burnett “a hundred years for her to burn through enough property tax to come close to the value of the property.”
Still, Burnett fears she might have to eventually move out of her home, and the city.
“My dream was to live in this house and die in this house,” she said. “That’s why I bought it 20 years ago.”
Lee said the widespread idea that constantly rising home prices are a good thing needs to be challenged.
“Even though the market’s gone down a bit, it’s still vastly unaffordable to a large majority of people who are currently renting,” he said.