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

Greater father involvement in the home leads to improved childhood development and increased marital satisfaction, says expert. (Black Press Media file photo)
University of Victoria researcher finds lack of father involvement a drag on gender equality

Working women still taking on most child and household duties in Canada

New COVID-19 cases on Vancouver Island by local health area for the week of June 6-12. (B.C. Centre for Disease Control image)
New COVID-19 cases up on Island, but health officials say trends going right way

There were 22 new COVID-19 cases in Greater Victoria last week after just four the week before

Emergency health services treated a person after they were blocking traffic at the intersection of Fort and Douglas Streets on June 17. (Evert Lindquist/ News Staff)
Victoria intersection traffic returns to normal after protester blocked roadway

A person in a motorized wheelchair was blocking the intersection at Fort and Douglas Streets

Eric White’s roadside farm stand in Metchosin sits stocked with produce. (Photo courtesy of Eric White)
Fledgling Metchosin farmer frustrated by thefts from stand

Eric White said every dollar made at the roadside helps sustain his farm

Saanich police took a suspect into custody after a store employee on Cedar Hill Cross Road was assaulted Wednesday afternoon. (Black Press Media file photo)
Employee assaulted at Saanich store after asking suspected shoplifters to leave

June 16 incident saw worker taken to hospital with non-life-threatening injuries

People line up to get their COVID-19 vaccine at a vaccination centre, Thursday, June 10, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Vaccines, low COVID case counts increase Father’s Day hope, but risk is still there

Expert says people will have to do their own risk calculus before popping in on Papa

(Black Press Media file photo)
POLL: When was the last time you visited the mainland?

The films are again lighting the screens at local theatres, the wine… Continue reading

Anyone with information on any of these individuals is asked to call 1-800-222-TIPS (8477) or visit the website victoriacrimestoppers.ca for more information.
Greater Victoria Crime Stoppers wanted list for the week of June 15

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

Helen Austin performing with Trent Freeman at the 2018 Vancouver Island MusicFest. Austin is one of the many performers listed for the 2021 event.
Vancouver Island MusicFest goes virtual for 2021

Black Press to stream 25 hours of programming July 9-11

FILE – A science class at L.A. Matheson Secondary in Surrey, B.C. on March 12, 2021. (Lauren Collins/Surrey Now Leader)
Teachers’ union wants more COVID transmission data as B.C. prepares for back-to-school

BCTF says that details will be important as province works on plan for September

Provincial health officer Dr. Bonnie Henry outlines B.C.’s COVID-19 restart plan, May 25, 2021, including larger gatherings and a possible easing of mandatory masks on July 1. (B.C. government photo)
B.C. records 120 new COVID-19 cases, second vaccines accelerating

Lower Pfizer deliveries for early July, Moderna shipments up

A Heffley Creek peacock caught not one - but two - lifts on a logging truck this month. (Photo submitted)
Heffley Creek-area peacock hops logging trucks in search of love

Peacock hitched two lifts in the past month

The Calgary skyline is seen on Friday, Sept. 15, 2017. THE CANADIAN PRESS/Jeff McIntosh
2 deaths from COVID-19 Delta variant in Alberta, 1 patient was fully immunized

Kerry Williamson with Alberta Health Services says the patients likely acquired the virus in the hospital

The first suspension bridge is the tallest in Canada, with a second suspension bridge just below it. The two are connected by a trail that’s just over 1 km. (Claire Palmer photo)
PHOTOS: The highest suspension bridges in Canada just opened in B.C.

The Skybridge in Golden allows visitors to take in views standing at 130 and 80 metres

Most Read