The additional tax comes into effect on August 2 and the minister says long-term contracts, such as pre-sale agreements for condos, will not be grandfathered.
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Those moves were criticised by many at the time and are estimated to add tens of thousands of dollars to the price foreign buyers pay for real estate in the country, but they pale in comparison to moves made in Canada.
Rather than charging a tax to foreign nationals, Davidoff said he would have preferred to see a policy that provides tax breaks to homebuyers who can demonstrate they’re paying local income taxes.
It may sound like a contradiction in terms, but British Columbia hopes the 15% tax on foreign buyers will make housing more affordable for the middle-class.
And that revenue could be significant, considering foreigners accounted for about one in 10 home purchases, or $885 million worth of sold property in the region (10 per cent of the value of all transactions).
“Owning a home should be accessible to middle-class families, and those who are in a position to rent should be able to find a suitable home”, British Columbia Premier Christy Clark in a statement.
Some real estate officials suggest Chinese speculators have, at least in part, contributed to the rise in detached home prices, which have increased by 39% compared to last summer, according to the Real Estate Board of Vancouver.
Assistant professor at Simon Fraser University Josh Gordon shared this sentiment, saying it is common practice for overseas money to flow into Vancouver real estate through Canadian permanent residents as proxy buyers, such as a child attending a Canadian university, thereby avoiding such tax altogether. Using an assumption the foreign share is in the range of five to 14 per cent, Dolega predicts the new rules will reduce sales by 15 to 20 per cent over the next three quarters and lead to decline in average prices of about five per per cent.
That legislation targets Vancouver’s red hot real estate market.
However, Charles St-Arnaud, senior economist at Nomura International Plc in London, noted that it isn’t clear if the new tax will create a big downturn.
Previously, the CMHC said there were only “moderate” signs of problematic conditions in Vancouver’s housing market.
“Just two months ago, there was no crisis”.
Yesterday (July 25) the B.C. government caught a lot of people off guard when it announced it was implementing a 15-percent tax on residential Metro Vancouver real-estate sales to buyers who are neither a citizen nor a permanent resident.
The tax echoes measures taken by cities like Hong Kong, Singapore and Melbourne, which have all introduced some sort of additional stamp duty on foreign buyers.
British Columbia’s plans to dampen the influence of foreign investment in Metro Vancouver’s scorching housing market with a new tax on foreign buyers is causing widespread panic and confusion, say industry insiders.
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“In the reports I get, the analysis is they tend to have levelled out the market, or reduced relatively significantly the rate at which values have gone up opposed to dramatically reduced the value of real estate”, he said.
