N.S. plans to charge non-residents 10% tax to buy property. Realtors say it's a bad idea

The association that represents almost 2,000 real estate agents in Nova Scotia is calling on the Houston government to rethink its plans to double the deed transfer tax for non-residents buying homes in the province.

The Financial Measures Act, up for public comment at Monday's meeting of the newly created public bills committee, calls for the non-resident deed transfer tax to increase from five per cent to 10 per cent on April 1.

Suzanne Gravel, incoming president of the Nova Scotia Association of Realtors, said the measure will send the wrong message to would-be investors in the province.

"It instantly gives a person [a] 'they don't want us to come there' feeling," Gravel told CBC News recently. "It's a big tax, it's a big tariff."

Gravel used the word tariff in drawing a parallel between the proposed tax increase and Premier Tim Houston's desire to open up the province to freer trade as a buffer against new U.S. tariffs.

"To say we want to share, we want to be able to do business across provincial lines and then this," said Gravel. "That's keeping everybody out because we're the only province that does this."

That sentiment is shared by John Duckworth of Duckworth Real Estate in Chester, N.S., whose primary business is selling to non-resident clients who want to have a second home in Nova Scotia.

Duckworth said the proposed tax hike will discourage people from moving to the province.

"It's a 'don't come here' tax," said Duckworth. "I don't know what the premier's trying to do with this, but the whole thing is just totally negative."

He said the measure would also affect Nova Scotians selling their properties, forcing would-be home sellers to lower their price to shoulder some or all of the increase being proposed.

Dalhousie University economist Lars Osberg agreed.

"In the jargon of economics, that's called the price elasticity of demand or the price elasticity of supply, but the plain English of it is that if you really want to sell this property, you're gonna accept a lower price," said Osberg.

"It's always going to be partly the buyer and partly the seller [who pays the deed transfer tax] in proportion to how badly they want to sell or buy."

On the day he introduced the proposed changes, Nova Scotia Finance Minister John Lohr told reporters increasing the tax was a way to give Nova Scotian buyers a leg up on out-of-province competition when it comes to house sales.

"If a Nova Scotian is bidding for a home and someone else is bidding on it as a cottage, we want that Nova Scotian to have a slight advantage and that's what that non-resident deed transfer tax is — a slight advantage for a Nova Scotian," said Lohr at the March 5 bill briefing.

Neither Gravel nor Duckworth see it that way. They say homes that are appealing to out-of-province buyers are not the homes Nova Scotians are looking for.

"I don't see where it has anything to do with the Nova Scotians wanting to buy homes because normally they're buying homes where they work and that's gonna be the HRM area largely, and perhaps Sydney, but not likely to be rural Nova Scotia," said Duckworth.

He said he doubts the $13 million the province estimated it would raise by increasing the tax will be a net benefit given how much part-time residents contribute to their local communities.

"I'd love to see the economic study that was done to prove to the province that this was going to be a net increase in economic activity here," Duckworth said.

"I'm sure they haven't done any studies and I'm sure they don't even understand the effect this is going to have on rural Nova Scotia, on the builders, on the operators of retail stores, on the restaurants, on the car rental companies, on the cultural events."

James Wooder, a Cape Breton resident with property on the South Shore he may one day want to develop, worries the increase could depress real estate prices in rural communities.

"Somebody thought it was a good idea, but they didn't think about the knock on and unintended consequences of this, which could be disastrous," said Wooder. "What does it mean for municipalities if the overall [tax] base for the municipality takes a hit over the long run?"

He pointed to the developer who has been investing in Cape Breton's Ski Cape Smokey and building 74 condominium units at the base of the hill in Ingonish.

"What we've done now, we're rewarding him for all the investment and time and energy he's put into Nova Scotia and the risk that he's taken by slapping a punitive tax on him that compromises his business model," said Wooder, who would also like the Houston government to reconsider the tax increase.