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.”