The new tax is similar to other schemes in Hong Kong, Australia and Singapore created to curtail rapid house price growth. “There is evidence now that suggests very wealthy foreign buyers have raised the overall price of housing for people in B.C.”, she said this week at a press conference in Victoria, British Columbia.
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The goal is to stop foreign investors from driving up prices, but Richard Bell with Bell Alliance says it puts Canadian sellers in a bind because the closure of their current deal could affect their ability to buy another home.
The additional property transfer tax rate of 15 per cent will apply to both buyers who are foreign nationals and foreign-controlled corporations that register their residential purchases in Vancouver. All purchasers already have to pay a one-per-cent tax on the first $200,000 of their purchase, two per cent on the remaining value up to $2 million, and three per cent on the portion above that.
“Realtors should not be doing that, and they should be informing their clients that every single one of these transactions could be audited”, Clark said. It is in addition to the province’s general property transfer tax, the B.C. government said in a statement on Monday.
The revenue from the additional tax would be used to fund housing, rental and support programs, the minister said.
As of right now foreign buyers account for 10% of Metro Vancouver real estate.
The Bank of Canada recently issued warnings about unsustainable growth, while the federal government has struck a working group to issue recommendations on how to make Vancouver and Toronto’s housing more affordable. An earlier release of data covering June 10 to 29 and not including end-of-month sales found only 5 per cent of the sales in the region involved foreigners.
That legislation targets Vancouver’s red hot real estate market. There’s also the fact that government meddling in a free market – even an irrationally exuberant housing market – runs the risk of backfire, should measures diminish their constituents’ home equity or wealth.
The new tax doesn’t apply to non-citizens who have permanent residency status. Rank outsiders, in other words, who can not vote. Separately, Ottawa has taken steps in recent years to limit risky borrowing, including a move to increase the minimum down payment required for more expensive homes.
The NDP Housing Critic David Eby says the legislation is not only ineffective, but will hurt the island.
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“We have a problem where speculators are buying all the units in a development and scalping them like hockey tickets, and this won’t catch that”, he said.
