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BC NDP real estate policies are slowing down the economy

And they're not really making housing much more affordable
real estate

For the first time since it took power in 2017, the BC NDP government can see economic storm clouds gathering.

And, ironically, the predicted slowdown is largely attributed to its new taxation measures.

Two financial institutions released economic analyses that zeroed in on B.C.’s economy, with both projecting it will slow down significantly due to the cooling of the province’s real estate market.

Central 1 Credit Union concluded the province’s economy will have three years of weak economic growth after several years of robust annual growth of more than three-per-cent GDP.

Its deputy chief economist, Bryan Yu, said in a news release that “economic growth is being held hostage by the housing market slump, which is deeper than previously forecast.”

As a result, Central 1 is now forecasting the provincial economy will grow by just 2.2 per cent in the coming year, then 2.4 per cent in 2020 and 2.8 per cent in 2021.

TD Economics had a more pessimistic assessment, projecting B.C.’s economic growth to be just 1.4 per cent this year and two per cent next year. Again, the chief villain is the slumping real estate sector.

“B.C.’s deepening housing market slowdown is likely to put a larger damper on growth this year,” it said in its provincial economic forecast. “The province’s housing market has been the most hard-hit by the implementation of tighter rules, rising interest rates and B.C. government policy measures.”

To be sure, neither of these projected scenarios constitute being anything close to a recession, but this may spell bad news for the government’s three-year fiscal plan. The lower the economic growth, the fewer tax dollars are available. That plan projects an increase of almost $4.5 billion in tax revenue over that period.

What’s disappointing about this situation is that measures such as the speculation tax, the increase in the foreign buyers tax and the higher tax on high-end homes were supposed to make housing more affordable.

Instead, while house prices and some rents have dropped, they haven’t dropped to the point of making homes actually affordable.

So it now looks like the government’s housing policies (which do not place much emphasis on increasing the supply of housing) are not only not meeting the affordability targets, but are instead having the biggest impact at slowing down the provincial economy

Now, none of this may come back to haunt the NDP. Both financial institutions are predicting employment levels will remain high with the government’s infrastructure program considered to be providing a cushion to any slowdown.

As well, the BC Liberals continue to struggle to find their identity as an Opposition party and party leader Andrew Wilkinson has had a bad run of foot-in-mouth-itis in recent days.

But after experiencing relatively sunny days during their first 20 months in office, things may be about to get a little darker for the NDP government.

Keith Baldrey is chief political correspondent for Global BC