A quarter-point drop in the interest rate to three per cent, announced Wednesday by the Bank of Canada to help counter the threat of tariffs plotted by the U.S. government, should help some Prince George homebuyers waiting to take on a mortgage.
But the uncertainty of not knowing if those trade barriers will actually take effect and their potential to damage the city’s forestry-dependent economy might convince people to hold off before making any big purchases, according to local real estate broker Mike Hurrell.
“In Prince George we’re kind of in a wait-and-see mode,” said Hurrell, owner of Maxsave Real Estate Services.
“Our local economy probably isn’t as strong as it’s been the last few years and these potential tariffs coming down could really affect the forest industry in Prince George. That uncertainty might offset some of the normal increases in housing market activity that we normally would see with an interest rate drop.”
The central bank’s sixth consecutive rate cut since April will help stimulate the economy, said Hurrell, but he added that government over-regulation is creating unnecessary barriers for buyers and builders that will continue to dampen the local housing market.
There’s been an overemphasis on government subsidies for new construction of multi-family housing and rental units and not enough support for builders of single-family homes, Hurrell said, going on to say that if the feds are serious about stimulating housing they would drop the five per cent GST on all new housing.
“The federal government really geared all the housing programs, such as eliminating GST, for purpose-built rental properties and as a result you’re getting a lot of investment in these multi-family units and we have a lot of them coming on board now which is going to create an oversupply,” he said.
“People who actually want to live in houses are paying exorbitant prices and the builders are completely ignoring that segment because the government subsidies that are available in the multi-family market right now. So all you’re getting is townhouses and multi-family rental properties being built now and that’s not the only thing people want.”
Hurrell said sales are brisk for properties on the low end of the price scale but have been stagnant on higher-end listings, starting at $600,000. The average ‘70s-era bungalow in the city is selling for $440,000. He said there are only three new-build single family dwellings currently on the market and that’s not likely to change any time soon because almost nobody is building them.
“There's a shortage of the types of property that everybody’s looking for,” he said.
Hurrell said there would be a lot more affordable housing if governments would scrap the anti-flipping taxes which discourage renovators from buying derelict properties and turning them into updated well-maintained homes for purchase or rent.
On Jan. 1, a 20 per cent provincial government anti-flipping tax took effect and that means anybody who sells a home within a year of purchasing it will pay the province 20 per cent of any profits. That drops to 10 per cent after 18 months and down to zero after two years.
The provincial tax is in addition to the federal anti-flipping tax structure put in place at the start of 2023 which, according to Hurrell, takes a 25 per cent bite out of profits from any property bought and sold within 365 days.
He said renovators won’t buy houses to fix them up because of the two-year-ban on flipping and new BC regulations on short-term rentals which require owners to live at the property rules out another segment of the market for investors.
“The politicians have targeted flippers because they’re taking way homes from people that would otherwise buy homes, but the unintended consequences is a lot of those homes are in such deplorable condition that nobody would live in them anyway,” said Hurrell.
“You’re looking at 45 per cent tax and if you do a substantial renovation it’s GST applicable and you might have to pay another five per cent. To top it all off, the provincial government now requires that all contractors who do these renovations have to be fully licensed and go through about two years’ worth of education courses.
“So what do you think the contractors do, because there’s only select few who have these licenses. It essentially gives them a monopoly and so the price of the actual contracting goes up. Gone are the days when Joe Blow, who’s good at carpentry, can go in and flip a house. As a result, you have these houses that would be perfect for renovation but God forbid the little guy makes a bit of money flipping a house.”
Hurrell said people should be concerned about the cost of housing and he’s convinced deregulating the industry would be good start. He says there are examples in other markets – Calgary, Edmonton, Houston and Phoenix – where minimal regulation on flipping has worked to keep prices in check.
He said a uniform one-size-fits-all policy on housing does not take into account local concerns and provincial/federal authorities need to get better at addressing the needs of municipalities.
“I think go back to basics and look to areas that don’t have the housing problem, what are they doing differently, why can’t we model ourselves after them and if subsidies is the answer to try and get housing costs down, then perhaps we need to be getting local input on where those subsidies are going,” Hurrell said.
Housing prices and the cost of rental units are high across the board in BC, but in cities like Prince George, there are only a few private-sector developments ongoing. Most are government-driven. Builders who see the profit potential are instead shying away and that means fewer jobs for tradespeople.
“They’re not doing it because we’ve had a series of policies between federal and provincial governments that have basically taken a baseball bat to investors, developers and landlords,” said Dan McLaren, president and CEO of the Prince George-based Commonwealth Group of Companies.
“We’ve seen a government that beats up on the people that are building. Where’s the incentivization? Even though, theoretically there’s all this money to be made, when you start to drill down there really isn’t. They’ve taken all the profit-incentive out of it.
“They need less rules, not more. This is kind of the habit of our current provincial government, every solution to every problem is always more taxes and more regulation and look what we’ve got. At a time when you think housing prices are so high you want people building houses to increase supply and make profits, but they’re not.”
The prime interest rate was at 5.20 per cent Thursday and a five-year fixed mortgage can be had a 4.29 per cent.
While lower interest rates will help Canadian consumers, McLaren said the 25 per cent proposed tariffs would devastate northern BC’s resource-based economy which sends 58 per cent of its exports across the U.S. border, complicating the recovery of a forest industry already struggling with a shortage of economic fibre that has closed or curtailed mills across the province.
“They’ve had the exchange rate that’s been in their favour but forestry guys have always lived in a world of counter-veiling duties because the forestry dynamic is not part of NAFTA and what we should be striving for is a global contract for proper free trade,” said McLaren
“President Trump says he’s bringing the tariffs because we’re taking advantage of him, well, this current (free trade agreement), he negotiated it. The only way he can bring the tariffs on is if there are exogenous circumstances, so that’s why they’re making so much noise about border problems.”
McLaren says there a real chance Canada could be heading for a recession if the tariffs are applied and there’s a corresponding drop in GDP for the next two quarters, and with Canada so dependent on trade with the U.S. there’s no immediate help on the horizon.
“If the Petronas pipeline was getting built and we were getting our products to the Asian market or if Energy East was created and we were getting our energy products to the Maritimes and Europe we’d probably be having a different discussion,” he said.
“But if you’re going to say no to industrial development, no mining, no forestry - try getting a second house built on a piece of farmland. If we’re not allowed to do anything and the government chooses to ramp up spending it’s a terrible combination.”
