The government’s attempt to cool the hot real estate market and address affordable housing issues in Metro Vancouver with a 15-per cent tax on purchases by foreign buyers could have a spillover effect elsewhere in B.C.
The tax came into effect Tuesday amid news of collapsing real estate deals in Vancouver and a rush of thousands of land transfer applications filed to beat the tax deadline.
Opinions on how the tax might affect Island markets range from the view the tax will have little to no effect to the possibility of Island sales falling through if foreign buyers back out of pending transactions in Vancouver.
“It’s not winning any popularity contests, for sure,” said Janice Stromar, Vancouver Island Real Estate Board president-elect.
But Stromar also said she doesn’t see the tax having a significant effect on the local market, in part because the profile of a Nanaimo buyer shopping for cheaper Island real estate is different from that of investors, foreign or domestic, who are willing to pay skyrocketing Vancouver prices.
A VIREB buyer survey taken in 2015 indicates less than two per cent of buyers in Nanaimo and Victoria were foreign. Foreign buyers account for nearly 11 per cent of real estate sales in Vancouver and as high as 18 per cent in Richmond and Burnaby. Nanaimo buyers are often retirees or people relocating because of work transfers or career changes – many of those are from elsewhere in B.C., Alberta or other Canadian provinces – as opposed to overseas buyers looking for investment properties.
“In my day-to-day business here, it’s not that I’ve seen a bunch of foreign owners looking for land,” said Jason Finlayson, VIREB past-president. “I’ve seen, you know, young buyers that have sold their properties to, sometimes, foreign owners on the mainland, cashed in and have come here to capitalize on a better quality of life … The dollar goes way further over here.”
Australia, New Zealand, Britain, Singapore and Switzerland are among countries that have legislated restrictions on real estate purchases by non-residents. Hong Kong implemented a 15 per cent tax on non-resident real estate buys in 2012 and now charges 20 per cent in additional taxes on buyers who sell within three years.
Finlayson said deals in Nanaimo pending on transactions in Vancouver could fall through; on the other hand, the tax could alleviate foreign investor fixation on Vancouver.
“It’s interesting,” Finlayson said. “I think it’s a little too early to try and tell.”