Two researchers from Thompson Rivers University (TRU) believe B.C.’s property transfer tax aimed at foreign buyers fuelled the red-hot real estate market in Chilliwack.
Dr. Jabed Tomal from TRU’s Department of Mathematics and Statistics teamed up with Dr. Hafiz Rahman from the Department of Economics. Together, they examined Bill 28 and compared its impact on housing prices in Chilliwack and Kamloops, where TRU is located.
Bill 28, also known as the Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, was introduced on July 25, 2016. Tomal and Rahman’s research suggests the new tax imposed on foreign entities buying property in Metro Vancouver caused sudden rapid increases in housing prices in nearby cities.
The ripples were felt as far away as Kamloops, which needs a generous definition of ‘nearby’ to qualify at 400 kilometres away.
The official title of the research paper is ‘A Bayesian piecewise linear model for the detection of breakpoints in housing prices.’
Tomal and Rahman picked Chilliwack and Kamloops because they both have similar-sized universities, and because both cities are similar in total size, landmass, business capacity and population. They gathered data from monthly statistical reports issued by the Canadian Real Estate Association (CREA). They analyzed a 115-month period from January 2011 to July 2020.
They found that housing demand in Chilliwack picked up in June of 2015, partly because home prices in Vancouver were already becoming unbearable and people were already looking at the Fraser Valley. But the researchers hypothesized that debate/discussion around Bill 28, and speculation about its impact on Vancouver home prices, gave home buyers even more motivation to look to Chilliwack a full year before the tax was actually introduced.
They called this a ‘threshold effect,’ causing a ‘breaking point.’
It took Kamloops an extra two months to show a similar spike in home prices.
“This happened most likely because Chilliwack is situated within a closer proximity of the Metropolitan Vancouver than Kamloops,” they wrote.
In 2018, Tomal and Rahman identified another threshold effect causing a breaking point when the provincial government expanded the new tax to other regions, including Chilliwack. While the stats in Chilliwack showed a stabilization of housing prices, Kamloops was not included in the tax’s expanded reach, and housing prices continued to climb at a very fast rate.
“The housing market in Kamloops is sky rocketing since then, with rapid growth in home prices quantifying 513.33 per cent higher after threshold effect than the price growth before October 2015,” they wrote.