(Recasts with cut to property tax revenue forecast, de Jong quote)
Nov 29 (Reuters) - British Columbia's government raised its 2016-17 budget surplus forecast for the second time this year on Tuesday even as the Western Canadian province slashed its revenue estimate for a new tax on property purchases by foreigners.
British Columbia said it now expected a surplus of C$2.2 billion ($1.67 billion) this fiscal year, up nearly 16 percent from its C$1.9 billion September forecast.
The increase was driven by higher personal income tax revenue and a robust natural resources sector, including higher prices for natural gas and coal, it said.
"We continue to see the benefits of Canada's strongest and fastest growing economy," Finance Minister Michael de Jong told reporters after releasing the province's second quarterly fiscal update.
The improved surplus forecast came even though the province scaled back its estimate for revenue from a foreign property transfer tax to C$50 million from a September forecast of C$165 million.
British Columbia introduced the 15 percent tax on foreign buyers of properties in the Vancouver area on Aug. 2 in an effort to improve affordability in Canada's most expensive housing market. In the wake of the tax, foreign purchases have slumped from around 13 percent of total property transactions between June and August to around 3 percent in October.
The government's initial estimate was made soon after the tax was introduced when it was "not quite certain what effect it would have on market behavior," finance ministry spokesman Jamie Edwardson said.
De Jong said the latest C$50 million estimate could end up being a little low. The government expects foreign property purchases could "settle" at around 4-5 percent of total transactions, Edwardson said.
The government left unchanged its September forecasts for economic growth in British Columbia at 2.7 percent in 2016 and 2.2 per cent in 2017.
$1 = 1.3423 Canadian dollars Reporting by Nicole Mordant in Vancouver; editing by Diane Craft and Andrew Hay