B.C.’s Finance Minister said his government is working quickly to crack down on unscrupulous realtors and collect more data on the extent of foreign investment in real estate.
But Mike de Jong remains highly skeptical that levying higher taxes on buyers who do not make their income in Canada is the answer, saying he fears such a move would dissuade individuals and companies from investing in the province.
“We work awfully hard to attract people to Canada who come here to invest here, to create jobs here,” de Jong said during a May 10 press conference.
“There’s a large group from a large province in China who are here signing deals to invest. Before we are going to single out one aspect of foreign investment, we’d better have a clear sense of what the impact actually is on the market.”
A regulation change designed to rein in “shadow flipping” will come into effect on May 16. That term describes the practice of buying a property with an assignment clause and then selling the assignment before the deal closes, often without the knowledge of the seller. The practice can inflate the price of the property, and allows the various buyers to avoid paying B.C.’s property transfer tax.
Under the new regulations, realtors will be required to get written consent from the seller before transferring the contract, and any profit resulting from an assignment contract transfer would have to be returned to the seller.
In June, the government will also start to collect information about the citizenship of property owners through the property transfer tax form when owners register property at B.C.’s Land Title Office. Companies who own property will be required to provide the name, address and contact information for company directors who are not Canadian citizens. The information will be made public in aggregate form, likely at the end of 2016, de Jong said.
Chart by Urban Futures , using data from the Real Estate Board of Greater Vancouver
Unlike other countries, Canadian governments currently do not collect data on foreign owners of real estate. Critics have said the system proposed by the BC Liberals will be easy to evade, but de Jong said regular audits would ensure property owners are complying.
Any future policy would be based on what the collected data shows, de Jong said. He characterized the heated public debate around the issue as being unfounded on any real evidence that foreign ownership is driving the enormous price increases in Metro Vancouver real estate over the past year.
B.C. residents now say housing is their number one issue, overtaking concerns about the economy and jobs, according to a recent poll commissioned by Business in Vancouver.
“We’d better have a clear sense about what the impact actually is on the market … and we’d better have a clear sense of what our objective is,” de Jong said. The goal is to have “an accurate sense of what is taking place that goes beyond what someone’s name looks like or what they look like.”
Josh Gordon, a political science professor at Simon Fraser University, recently published a report that brings together much of the academic work that has been done on the issue, which shows that foreign investment is having an impact on the Vancouver property market.
“All of the other explanations, they just don’t add up. They don’t make sense,” he said.
But de Jong said he believes the solution is not to restrict demand by increasing taxation on foreign buyers, but to increase supply; he suggested that if municipalities were to speed up delayed development applications, “it would relieve some — not all but some — of the pressure on the market.”