Quarterly report shows hot real estate market lifts B.C. budget into billions
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VICTORIA — British Columbia's hot real estate market has boosted the province's bottom line, freeing cash for a housing program and allowing the government to cancel a planned hike in medical services premiums.
Finance Minister Mike de Jong said Thursday that he's now forecasting a budget surplus of $1.9 billion, more than $1.6 billion over the original estimate in February.
He released a financial update that included improved revenue forecasts of about $2.5 billion, propelled largely by higher property transfer tax revenues and increased corporate and personal income taxes.
"Suffice it to say, it's been a pretty good year so far," said de Jong. "We were forecasting a surplus of $264 million. There's now a surplus forecast of $1.94 billion. We're in this position — the envy of the country really — because we've taken a balanced approach and haven't gone on spending sprees," de Jong said.
The greatly improved financial forecast comes just months before a provincial election in which B.C.'s Liberals are seeking a fifth consecutive mandate.
"This is a product of a strong economy," he said. "There are more people in B.C. There are more people coming to B.C. There are more people working in B.C. They are earning more money and therefore paying more taxes."
Property transfer tax revenues are now projected to be $965 million above the original forecast. The budget has been revised to forecast $2.2 billion in property transfer tax revenue, which includes the foreign buyers tax the government introduced in July.
De Jong didn't say how much had been generated so far by the foreign buyers tax, but added that figure would be released next week.
The government has been under pressure much of the past year to take measures to address Vancouver's overheated real estate market, prompting the Liberals to introduce a 15-per-cent foreign buyers tax in July.
"There's no question the market in the Lower Mainland, in Metro Vancouver, in other parts of B.C. has been growing at a pace that ultimately the government thought was unsustainable and warranted intervention," de Jong said. "And we did."
The financial update forecasts 40,000 annual housing sales, with foreign buyers making up five per cent of that number.
De Jong said the government will use $500 million from the property-tax windfall to fund a housing affordability initiative to be announced next week.
He said last spring the province began examining housing and retail developments that have grown near major Vancouver area transit exchanges.
The minister said higher revenues will also allow the government to cancel the planned four per cent medical services plan premium increase originally scheduled for next year.
New Democrat finance critic Carole James said it appears de Jong and the Liberals don't understand that many British Columbians are struggling to make ends meet after facing increased rents and housing costs and higher services fees and utility rates.
"The government really wants you to believe everything is fine in B.C. but for many, many families they are struggling," she said.
James said it's ironic that the government's increased property transfer tax revenues are largely a result of its failure to tackle the issue of out-of-control housing prices years ago.