Tax complex
Tax first, provide data later – that was the province’s two-step approach last week as it announced a new, 15% property transfer tax for foreign buyers of residential property in Metro Vancouver on July 25, and then, on July 26, reported that foreign buyers accounted for 9.7% of all residential property sales in the region between June 10 and July 14.
The figure is up from two weeks earlier, when the province reported that data till the end of June showed that 5.1% of sales in the region were to foreign buyers.
Province-wide, sales to foreign nationals accounted for 6.6% of sales from June 10 to July 14, double the 3.3% rate reported two weeks earlier.
The larger sample size means the current figures offer a more accurate picture of provincial housing sales, at least in summer, and suggests that more property is being purchased by foreign nationals than remains vacant – surely good news in an environment where offshore investors are credited with contributing to a rise in unoccupied units.
But the tax sends a clear signal that Victoria doesn’t want foreigners buying up – and heating up – B.C.’s largest, most expensive real estate market. The property transfer tax, effective this week, aims to cool activity while the additional tax revenues will help fund yet-to-be announced provincial housing and rental programs.
The new legislation also permits Vancouver to administer a tax on vacant homes, another measure widely seen as targeting foreign buyers.
Speaking a day after the tax was announced, local project marketers held back on predicting the success of the measures.
George Wong, principal of marketing firm Magnum Projects Ltd., said he knew of two deals – both for single-family properties – which collapsed as a result of the province’s announcement.
“The optical damage is being felt already,” he said, comparing the snap imposition of the tax to Ottawa’s cancellation of the immigrant investor program in 2014. “There’s going to be, obviously, reputational and political damage. That’s for sure.”
Similarly, project marketer Bob Rennie, who chairs fundraising for the BC Liberals, said his own long-standing preference has been for a tax on speculation. By targeting foreign buyers, 76.6% of whom hail from China, the government invites fiscal and social outcomes.
“My worry is that if this doesn’t raise a lot of tax money, it does elevate racism and prejudice,” Rennie said, adding that there’s no easy cure for the region’s age-old angst over housing supply.
“It’s a start on curbing demand, but then, how do we increase supply?” he said. “I just hope that these measures start to bring holistic views and solutions.”
