A recent report by Jabed Tomal, from the Department of Mathematics and Statistics, and Hafiz Rahman, from the Department of Economics, provides an interesting update to their recently published study which explains how Bill 28, BC’s foreign-buyer tax, helped fuel the booming real-estate markets in Chilliwack and Kamloops.
While their previous study found one threshold effect, or rapid increase, in Kamloops housing prices, Tomal and Rahman discovered the city’s housing market experienced a far greater increase in prices in April 2020. Their updated research includes data collected over 27 additional months (January 2010 to December 2010 and August 2020 to October 2021), beyond the previous study’s findings from January 2011 to July 2020.
“We believe this is probably due to multiple causes such as COVID-19 issues, buyers’ migration from larger to smaller cities, low mortgage interest rates and investors’ speculation purchases, in addition to Bill 28,” says Tomal.
“Before the first threshold effect in August 2015, the price increase per month in Kamloops was $333.09. After the first threshold effect, the price increase was $1,953.40 per month, which is an increase of more than 586 percent. After the second threshold effect, the price increase was $9,463.90 per month, which is an increase of more than 2,841 percent than before the first threshold. This has a tremendous effect on home buyers.”
Both researchers believe that Kamloops home buyers will continue to pay more for their houses because of the 2018 bill and the increase in prices in April 2020.
“If the tax is introduced in Kamloops, based on what we’ve learned from our study, we would expect the price increase to slow down, but it is difficult to predict how pronounced that might be,” says Rahman.
“The impact of our work is making both the residents of Kamloops and the government aware of what is going on in the real estate market,” adds Tomal. “All of our findings show that the government’s introduction of tax policies has a statistically significant effect on home prices, so they should consider further expansion of the additional property transfer tax for foreign buyers to include Kamloops. We’ll have to see what they do.”
Rahman says their next steps will include expanding their research to obtain a more accurate picture of how the tax affects housing markets in other cities.