Will housing valuations impact the election?
Posted April 2, 2009 by Sacha Peter - Link
Category: Economy
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Reading the April 2009 report of the Greater Vancouver Real Estate Board – “benchmark” (average) prices have dropped about 14.0% over the past year, but over the past three years prices have been up 8.6%. Over the past five years, benchmark prices are up 45.9%.
Initially thinking it through, while I don’t think real estate prices will have much of an electoral impact, there are a couple variables in play.
1. The volume of housing transactions are down, which will affect provincial revenues through the property transfer tax. Calls to get rid of the property transfer tax will probably be lessened as a result of reduced transaction volumes. Ironically, during lower volume times probably makes it easier for government to do something about the property transfer tax as the impact on revenues would be lessened.
The property transfer tax is a tax on 1% of the first $200,000 of transacted property, and 2% for anything above this. The thresholds have not been adjusted for inflation and this revenue source constitutes approximately $735M for the 2008-2009 fiscal year. First time home-buyers can receive an exemption for up to $425,000 of property value (this amount doesn’t go too far in the GVRD!).
2. Lower property valuations would likely impact older people’s networths – equity in real estate is the primary asset of a lot of residents, especially older people in the Vancouver area that have seen their houses appreciate. As older residents tend to have higher voting frequency, property values (or the perception of which government will do more to enhance property values) may have an influence on the vote.
Conversely, lower property values enhance “affordability” of housing, so there is a zero-sum relationship between two groups of people – those that own real estate, and those that want to own real estate. It is difficult to judge the political impact of this.
The government has already implemented measures to allow older homeowners to take low-interest rate loans to defer property tax payments on their residences.
If property values were to decline or rise 50% next year, would the provincial government be attributed for setting policies that caused the price change? I doubt it – it seems that the only issue that has gotten any sort of press is the property transfer tax, and it is unlikely that it will go away, nor will it decide any votes.