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

Sarah Sache and her 11-year-old son Winston at their home, West River Farm, in Chilliwack on Tuesday, June 15, 2021. (Jenna Hauck/ Chilliwack Progress)
Fraser Valley agriculture community offers big support for autism

Chilliwack dairy farmers, the Sache family, sing praises of Steve Saccomano’s charitable work

A tenant walks in front of her home on Boundary Road on Friday, June 18, 2021 after it was destroyed by fire the night before in Chilliwack. (Jenna Hauck/ Chilliwack Progress)
Chilliwack family homeless after fire rips through house on Abbotsford border

Turtle rescued, no one seriously hurt following Boundary Road fire in Chilliwack

Wild rabbits are all over Chilliwack, but people often think they’re someone’s lost pet and try to ‘save’ them. But the owner of Chilliwack’s Reptile Room says good intentions can have bad consequences for wild animals. (Photo by THE CANADIAN PRESS)
Owner of Chilliwack’s Reptile Room asks people to leave wild animals in the wild

Amber Quiring says people who think they’re helping are actually doing more harm than good

June is Pride Month.
EDITORIAL: We can make progress during Pride Month

In Chilliwack we get ever closer to becoming a community where everyone is accepted

New site plan for Cottonwood Mall puts Canadian Tire in old Sears location. (Twitter)
Canadian Tire planning a move next year to Cottonwood Mall

Tweet shows Canadian Tire logo placed on new site map of redeveloped mall

A small pod of Pacific white-sided dolphins pass by close to shore in Campbell River June 16, 2021. Still capture from video courtesy of Kimberly Hart
VIDEO: Dolphin sunset captured from Vancouver Island shore

Spectacular setting for view of travelling pod of Pacific white-sided dolphins

Audrey Inouye (right) with her two sons Kiyoshi McMillan (left) and Kaito McMillian drop off her milk to hospital volunteer Sylvia Hendel at a human milk depot on October 11, 2012. THE CANADIAN PRESS/Jason Franson
Fraser Health appeals for breast milk after unexplained drop in donations

Give your breast milk and save newborn lives, the health authority is encouraging mothers

The BC Ferries’ website is down for the second time in one week from what they say is likely an overwhelming increase in web traffic. (Black Press Media file photo)
Surging web traffic crashes BC Ferries’ site again

Website down for second time this week

John Furlong told the Vancouver Board of Trade on Feb. 20, 2020 that he thinks the city could and should bid for the 2030 Winter Games. (CP photo)
PODCAST: John Furlong lays out a ‘provincial’ B.C. plan to host the 2030 Winter Olympics

Podcast: Chat includes potential role for Vancouver Island communities

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

The pilot of this single-engine propeller plane was unhurt after crash-landing in a Como Road orchard Friday, June 18. Photo: Laurie Tritschler
Plane crash lands into Grand Forks orchard, pilot injured

RCMP have secured the crash site, pending investigation by Transport Canada

BC Ferries’ newest Island Class vessel is experiencing an issue with one of its thrusters off the Algerian coast. Photo courtesy patbaywebcam.com.
BC Ferries newest vessel having mechanical issues in Mediterranean

Island 4 will be repaired in Spain before crossing Atlantic

Thousands of protesters make their way through the downtown core during a Black Lives Matter protest in Ottawa, Friday June 5, 2020. THE CANADIAN PRESS/Adrian Wyld
MPs’ study of systemic racism in policing concludes RCMP needs new model

Chair of the House public safety committee says it’s time for a reckoning on ‘quasi-military’ structure

Most Read