Pundits split on whether foreign buyers tax will cool market

Real estate tax to be applied only in Metro Vancouver so far may drive foreign money to other regions

For sale sign in Surrey's Cloverdale town centre.

For sale sign in Surrey's Cloverdale town centre.

The province’s decision to charge a steep 15 per cent property transfer tax when foreigners buy Metro Vancouver homes may help cool the region’s “bubbly and overpriced” housing market, one B.C. economist says.

Jock Finlayson, executive vice-president of the Business Council of B.C., said it should have “some effect in dampening the demand” for real estate, particularly the single-family houses that have shot up much faster in price than townhomes and condos.

He said there’s some evidence the housing market is cooling already and that cooling may accelerate after the extra tax kicks in Aug. 2 on purchases by foreign nationals or companies they control.

MORE:  B.C. imposes foreign buyer tax on Metro real estate

He also noted the province’s decision to apply the new tax only in Metro, at least for now, could shift the foreign appetite for B.C. real estate to neighbouring regions.

“It may in fact lead to greater foreign demand for housing in areas like the Fraser Valley, Squamish, Greater Victoria and the central Okanagan,” Finlayson said.

Finance Minister Mike de Jong indicated the new tax could be extended to other parts of B.C. if needed.

Finlayson said he hopes the province uses the revenue, which will go into a Housing Priority Initiatives Fund, mainly to assist renters, who face steeply rising rents in some urban areas.

That should be a priority, he said, because home ownership, particularly detached house ownership, is “just not going to be the future” for many area residents.

Delta Mayor Lois Jackson said she hopes the new tax helps cool the market by deterring foreign purchases.

“We have to slow the market down somehow,” she said. “People who work here can’t keep up with the cost and we’re putting all of these young people totally out of the market.”

But Canadian Taxpayers Federation B.C. director Jordan Bateman suggested the 15 per cent tax – $300,000 on a $2-million house – may be viewed by foreign investors as merely a cost of doing business.

“If you’re spending 10, 15 or 20 per cent over asking, what’s 15 per cent going to do? It’s not going to discourage you.”

Bateman said the province must also close a long-standing loophole that allows the shares of a real estate holding company to be sold to new owners without triggering any property transfer tax because the registered owner – the company – didn’t change.

He called the province’s move a reversal.

“There is nothing more popular than a tax on somebody else,” Bateman observed.

Applying a tax on foreign buyers is a one-time cost on purchase.

The province has not yet pursued more aggressive options to block or deter foreign buying.

Australia has also seen strong investment flows from China and restricts foreign buyers to purchasing new homes only, not participating in the resale market.

West Vancouver Mayor Mike Smith in late July proposed allowing municipalities to charge an additional property tax on homes that are not principal residences owned by Canadian citizens.

That would have the effect of extracting more tax for the local city every year from foreign owners, as well as vacation home owners and investors.

The province recently released new data showing 5.1 per cent of homes sold in Metro Vancouver in three weeks of June went to foreign nationals, mostly from China.

Economists such as Finlayson and Central 1 Credit Union’s Helmut Pastrick both say more can be done to increase the supply of housing units in the market, through speedier municipal approvals.

But both also acknowledged that more rapid redevelopment and densification of single-family neighbourhoods would result in even fewer detached houses available, likely widening the price gap between multifamily units and detached houses.

Finlayson also suggested parts of the Agricultural Land Reserve that have never been productively farmed could be opened up to development.

White Rock Mayor Wayne Baldwin said while foreign buyers may be having some effect on house prices in his city, he’s more concerned at the potential for loss of existing rental apartment buildings if developers seek to turn them into condos.

Real estate board critical

The Real Estate Board of Greater Vancouver said the new foreign buyers tax “needlessly injects uncertainty into the market” because of the province’s decision to impose it with eight days notice and no industry consultation.

“Government has had a long time to take action on the affordability issue, yet they decide to bring this new tax in over a long weekend, with no notice, and no time to prepare,” said board president Dan Morrison. “To minimize short-term volatility in the market, we’re calling on government to exempt real estate transactions that are in the process of closing from this new tax.”

 

Just Posted

An artist’s rendering of a proposed student housing complex at 326 Wakesiah Ave. (WA Architects Ltd. image)
Graeme Roberts, who was mayor of Nanaimo from 1984-86, died this month at age 89. (Photo courtesy Nanaimo Community Archives)
City of Nanaimo flags at half-staff as former mayor Graeme Roberts dies at 89

‘Giant-killer’ beat out Frank Ney in mayoral election in 1984

Curl B.C. chairperson Teri Palynchuk is this year’s winner of the Janette Robbins Award for leadership. Palynchuk is pictured here with the Curling Canada Foundation Cup along with past chairperson Peter Muir, left, and Curl B.C. CEO Scott Braley. (Photo courtesy Curl B.C.)
Nanaimo curling exec wins Curl B.C. leadership award

Teri Palynchuk receives Janette Robbins Award

(Black Press file photo)
RCMP: Air ambulance called to Whiskey Creek after crash involving 2 motorbikes

Both riders taken to hospital with serious injuries

People watch a car burn during a riot following game 7 of the NHL Stanley Cup final in downtown Vancouver, B.C., in this June 15, 2011 photo. THE CANADIAN PRESS/Geoff Howe
10 years ago: Where were you during the 2011 Vancouver Stanley Cup Riots?

Smashed-in storefronts, looting, garbage can fires and overturned cars some of the damage remembered today

(Black Press Media file)
Dirty money: Canadian currency the most germ-filled in the world, survey suggests

Canadian plastic currency was found to contain 209 bacterial cultures

(pixabay file shot)
B.C. ombudsperson labels youth confinement in jail ‘unsafe,’ calls for changes

Review states a maximum of 22 hours for youth, aged 12 from to 17, to be placed in solitary

Eleonore Alamillo-Laberge, 6, reads a book in Ottawa on Monday, June 12, 2017. THE CANADIAN PRESS/Sean Kilpatrick
Parents will need to fight ‘COVID learning slump’ over summer: B.C. literacy experts

Parents who play an active role in educating their children this summer can reverse the slump by nearly 80%, says Janet Mort

The border crossing on Highway 11 in Abbotsford heading south (file)
Western premiers call for clarity, timelines on international travel, reopening rules

Trudeau has called Thursday meeting, premiers say they expect to leave that meeting with a plan

The B.C. government’s vaccine booking website is busy processing second-dose appointments, with more than 76 per cent of adults having received a first dose. THE CANADIAN PRESS/Jonathan Hayward
B.C.’s COVID-19 infections, hospitalizations stable for Tuesday

108 new confirmed cases, 139 in hospital, 39 in intensive care

Cowichan Tribes man Adrian Sylvester is worried that he was targetted by a trailer hitch thrown from a vehicle. (Facebook photo)
Cowichan Tribes man worried he was target of trailer hitch

Adrian Sylvester says no one has reported a missing hitch after one nearly hit him

CVSAR search the Puntledge River following a report of an abandoned kayak. Photo, CVSAR Facebook page
Comox Valley Search and Rescue spends four hours searching for no one

Overturned kayak a reminder for public to contact officials if they have to abandon a watercraft

Most Read