Industry critical of new B.C. tax on foreigners buying homes

The new 15% tax kicks in on August 2 for those not citizens or permanent residents
The new tax on foreigners comes after a government study that found more than $1 billion in foreign money was invested in B.C. real estate between June 10 and July 14 

Industry reaction to the B.C. government’s plan to tax foreign investors an extra 15% when buying residential real estate in Metro Vancouver has been swift and critical.

The government announced July 25 that foreigners who buy B.C. homes will have to pay the new tax, starting August 2.

“Housing affordability concerns all of us who live in the region,” said Real Estate of Board of Greater Vancouver President Dan Morrison.

“Implementing a new real estate tax, however, with just eight days’ notice and no consultation with the professionals who serve home buyers and sellers every day needlessly injects uncertainty into the market.

The measure comes after speculation that foreign money is to blame for surging Metro Vancouver home prices.

The tax is set to apply to the sale of all homes in Metro Vancouver except those on treaty lands of the Tsawwassen First Nation.

“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. It would have been prudent to seek consultation from the people most knowledgeable about the impact,” Morrison said.

“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.”

Those who are not Canadian citizens or permanent residents will have to pay the tax. That includes corporations that are either not registered in Canada or are controlled by foreigners.

B.C. residents already pay a 1% tax on the first $200,000 of their purchase, 2% on the remaining value up to $2 million and 3% on the portion above that.

The new measure would add $300,000 in new tax on a $2 million home.

“The data we started collecting earlier this summer is showing that foreign nationals invested more than $1 billion into B.C. property between June 10 and July 14, more than 86% of it in the Lower Mainland,” said de Jong to explain the government’s rationale for the new tax.

“While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure on a market struggling to build enough new homes to keep up. This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”

The new legislation, dubbed the Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016, also establishes a fund for market housing and rental initiatives, strengthens consumer protection, and gives the City of Vancouver the tools it requested to increase rental property supply.

“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,” said Premier Christy Clark.

“These changes are about helping to make sure that British Columbians can continue to live, work and raise their families in our vibrant communities.”

gkorstrom@biv.com 

@GlenKorstrom 

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C-suite uncertain about Canadian economic outlook

Conversely, executives bullish about their own business's fortunes
More than half (53%) of business leaders polled are neutral about the prospects for the Canadian economy, according to a quarterly survey.

Global uncertainty has C-suite executives still sitting on the fence in terms of a 12-month outlook for the national economy, says a quarterly survey of Canadian boardrooms.

The uncertainty of what will happen with the U.S. presidential election, the fallout from the Brexit vote and world oil prices all raised concerns for respondents

More than half (53%) of business leaders polled are neutral about the prospects for the Canadian economy, according to the survey conducted by Harris Poll and the Chartered Professional Accountants of CanadaThe number of fence-sitters count slightly more than previous quarter when 47% stated a neutral outlook.

More than a quarter (26%) expressed a pessimistic viewpoint about what lies ahead economically while only 21% are optimistic.

Most executives are adopting a “wait-and-see approach,” acknowledged Joy Thomas, president and CEO of CPA Canada, in a press release.

Nearly three quarters (72%) believe Brexit vote will have negative impacts on the global economy and 40% say it will have a negative effect here at home. 

With a looming U.S. election, nearly 70% of respondents are concerned the new president, no matter who is elected, will enact more restrictive trade policies with Canada.

Conversely, within the walls of their own businesses, executives were more bullish. Business optimism was at 46 per cent, basically unchanged from the previous quarter.  Of note, nearly two thirds (62%) of respondents are projecting revenue growth over the next 12 months, compared with 59% in the previous quarter.

The CPA Canada Business Monitor polls accountants in CFO, CEO, COO and other senior leadership roles.

news@biv.com

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10-year Canadian visas for Chinese hit almost 400,000

Number of multiple-entry permits has skyrocketed since 2010
Shrinkin Yevgeny/Shutterstock

Nearly 400,000 Chinese nationals were approved last year for multiple-entry visas, to come and go as they please from Canada for up to six months at a time, according to statistics obtained by Business in Vancouver.

Immigration, Refugees and Citizenship Canada issues the visas that are valid for up to 10 years. Its figures show that only 27,739 Chinese were approved in 2010, the year that Beijing’s approved destination status for tourism to Canada came into effect.

By 2012, when China overtook India in top spot, approvals hit almost 83,000. The 2013 figure of 113,110 nearly tripled in 2014 to 337,066. Last year, Chinese nationals were approved for 390,292 multiple-entry visas. India had the second most approvals last year, at 162,807.

“Immigration, Refugees and Citizenship Canada promotes the issuance of long-term multiple-entry visas to facilitate entry to Canada for legitimate travellers,” spokesperson Nancy Caron said via email. “As of February 6, 2014, all visa applicants are automatically considered for a multiple entry visa. A visa officer may be able to grant an individual a multiple-entry visa even if they applied for a single entry visa.”

Additionally, in 2015, Canada received 594,897 applications for temporary resident visas from Chinese nationals. There was also a nearly 95% increase in study permits issued between 2010 and 2015 to Chinese nationals.

Despite the increase in visits to Canada by Chinese nationals, who prefer travelling to and settling in Vancouver and Toronto, the B.C. Liberal government played down their influence on the province’s real estate market in a July 7 release of residential real estate transaction data. Based on self-reporting, only 5% of purchasers between June 10-29 reported foreign citizenship, but the ratio was 11-to-1 in favour of Chinese purchasers over U.S. investors.

But, less than three weeks later, the government about-faced, opening a four-day sitting of the legislature on July 25 by announcing the Aug. 2 imposition of a new 15% tax on residential purchases by foreign citizens, taxable trustees and foreign-controlled corporations in Metro Vancouver, except the Tsawwassen First Nation treaty lands.

A June online poll by Insights West found 80% of respondents thought a tax on non-resident property owners would be a good or very good idea. It was even higher – 83% – among respondents of East Asian descent.

The BC Liberals recalled the Legislature to amend the Real Estate Services Act to cancel the self-regulation the industry enjoyed since 2005 and to amend the Vancouver Charter to enable City of Vancouver to tax vacant houses and apartments.

news@biv.com

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Hydro revenue down with drop in domestic power demand

Crown power corporation’s 2015-16 annual financial report shows deferral accounts bolstering net income
BC Hydro’s 2015-16 net income was up from the previous fiscal year, but deferral accounting helped improve the Crown energy corporation’s financial report | Chung Chow

Without deferral accounts, BC Hydro’s net income for fiscal 2015-16 would have been much less than the reported $655 million.

The Crown power giant published its annual financial report for the year ended March 31 on Thursday, the same day as the central government’s public accounts were released.

Net income increased from $581 million a year earlier, but BC Hydro added another $475 million to deferral accounts.

“Without the deferral accounts Hydro would have lost $153 million in 2014-15 and had a positive net income of $180 million in 2015-16,” said NDP BC Hydro critic Adrian Dix.

Hydro reported almost $5.66 billion in revenue last year, down from almost $5.75 billion in the previous year. It said operating expenses fell $285 million to $4.25 billion, but finance charges increased $120 million to $752 million. Hydro spent $362 million less on electricity and gas purchases totalling $1.35 billion.

The report said that domestic revenue before regulatory transfers was lower than planned “due to lower domestic loads resulting from the loss of large industrial load related to declining market conditions including low commodity prices, and a warmer than normal winter.”

The result was the annual load being 3,351 gigawatt hours (GWh) below plan, excluding surplus sales. To put that in perspective, BC Hydro expects that the Site C dam, by the time it is built in 2024, would produce 5,100 GWh a year.

“The energy that would have gone to serving load will be sold to the market, at prices that are between 10% and 50% of what would have been received had it been sold to domestic customers,” the report said.

“This shows that BC Hydro estimates of domestic demand (40% over 20 years but flat over the past 10) are exaggerated and have led to bad decisions,” Dix said. “We are building Site C to subsidize Washington and Alberta businesses and consumers.”

Hydro said it spent $779 million on the smart metering program through March 31, $1 million under the approved anticipated total $780 million cost of the project. The John Hart Generating Station, under construction by SNC-Lavalin with a 2019 target, spent $441 million of its $1.093 billion project budget.

Through March 31, $950 million had been spent on Site C, which has an $8.4 billion budget that does not include a $440 million contingency held by the Treasury Board.

The report said the annual payment to the provincial government was $326 million, up from $264 million a year earlier.

Lottery revenue up

Meanwhile, the province’s BC Lottery Corp. (BCLC) gambling monopoly racked up $1.3 billion in net revenue on gross sales of $3.1 billion. The net was an improvement over the $1.25 billion in 2014-15.

The report said BCLC will provide $1.8 million of funding this fiscal year to the new Joint Illegal Gaming Investigation Team for external policing costs. BCLC estimated it would spend $3 million annually in Year 2 and beyond. A similar RCMP-led squad was shut down in 2009.

Liquor profit higher

Liquor Distribution Branch marked the first year of a new wholesale pricing scheme with $1.03 billion net income on $3.16 billion gross revenue. Retail sales increased from $1.2 billion to almost $1.38 billion.

BC Pavilion Corp. (PavCo) announced a $4.17 million deficit, down from $8.75 million a year prior.

The Vancouver Convention Centre was $7.5 million in the black, but BC Place lost $11.67 million.

PavCo negotiated an interest rate reduction with the government from 4.89% to 3.29% last November through 2049. PavCo owes $147 million on a loan related to the $514 million renovation of the stadium. It is scheduled to pay $7.5 million this year, then $7.3 million from 2018 to 2048 and $3.7 million in 2049. 

The report shows PavCo spent $853,000 on redevelopment costs in the last two years; it was liable for removal of toxic soils under the Parq casino construction site. The early 2017 opening has been delayed to fall 2017.

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Star Trek sequel adds to stellar year for B.C. film industry

Star Trek Beyond beams almost $70 million into provincial economy
Paramount Pictures

With the filming of the newly released Star Trek Beyond alone contributing $69 million to the B.C. economy over a 78-day period last year, the film industry in Hollywood North is entering warp speed.

Beyond the heavy-duty lure of tax benefits, industry leaders cite British Columbia’s skilled labour force, hospitable businesses and unique, picturesque landscape as some of the reasons for the sector’s stellar performance.

“Filming Star Trek Beyond in Vancouver and the surrounding areas provided us diverse filming locations and outstanding studios,” said Wendy Noss, president of the Motion Picture Association of Canada. “Beyond that we had access to amazing cast and crew.”

Wrapping up production in late September, the filming of Star Trek Beyond was part of a blockbuster year for the B.C. film and TV industry, and foreshadowed even bigger returns this year, with more large feature movies slated to be filmed on the West Coast in 2016. According to whatsfilming.ca, a website that tracks movie production in B.C., 34 feature films are expected to be produced in British Columbia. This is up 30% from 2015. Movies include sequels to Planet of the Apes, Fifty Shades of Grey and Pirates of the Caribbean.

But stars like Johnny Depp are not the only ones financially benefiting from big-budget franchises; industry leaders say increased B.C. film production means more jobs for Canadians. The instant cult classic Deadpool, released in February, hired over 2,000 Vancouverites for the film’s cast and crew, spending $19 million in wages. Star Trek Beyond employed over 3,900 people and paid $40 million in wages.

According to Creative BC, a government non-profit aimed at promoting arts and entertainment indstries in the province, the motion picture and sound recording sectors together grew faster then the B.C. economy, 3.6% to 3%. Overall the motion picture industry employs 25,000 people and contributes $2 billion to the provincial economy.

While any increase in film production is an obvious boost to employment and spending within the entertainment industry, big-budget movies can’t help but have their big budgets spill over into other industries. Of the $69 million spent on Star Trek Beyond by Paramount Pictures, Skydance and Bad Robot, over 40% was funnelled to industries outside of the entertainment sector.

According to the Canadian Motion Picture Association, an industry representative for large movie producers, the transportation, hospitality and forestry industries are some of the sectors that benefited from Hollywood North’s growth. The production of a single featured film, Star Trek Beyond, contributed $17 million in transportation rentals, $1.75 million to Vancouver’s hospitality industry and $1.6 million in lumber and hardware.

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