Sales of Metro Vancouver multi-family rental buildings, while designated as a commercial real estate transaction by the Real Estate Board of Greater Vancouver (REBGV), will be exposed to B.C.’s new 15% foreign buyer tax on residential purchases, the Finance Ministry has confirmed.
Speculative purchases of commercial land where the aim is high-density residential development would not be taxed, however, under the foreign buyer regulation.
The new regulations on foreign buyers in Metro Vancouver come into effect August 2. According to Finance Minster Mike de Jong, non-Canadians spent more than $250 million a week on B.C. residential real estate from June 20 to July 14, 86% of it in the Lower Mainland.
There was no information if any of these sales involved the booming rental apartment building market.
The sales volume of multi-family rental buildings in Metro Vancouver soared 142% to $1.1 billion in the first six months of this year compared to the same period in 2015, according to an industry survey compiled by David and Mark Goodman of HQ Real Estate Services. In Vancouver, sales of mostly older apartment buildings skyrocketed 288% to $705 million in the same period, the Goodman Report stated, based on 75 property transactions.
Real estate agents specializing in apartment buildings say the majority of buyers are locals or recent Canadians, so the foreign buyer tax will not have much affect on the white-hot market.
“Most of our buyers are local, or are permanent residents,” said Jackson Tang of NAI Commercial, who recently helped sell a 69-year-old Kitsilano apartment block for $4.5 million, or $750,000 for each of the six suites.
Land and multi-family deals dominate commercial sales in Metro Vancouver, according to the REBGV, based on transactions through the Land Title and Survey Authority of British Columbia.
Multi-family rental buildings are a revenue-generating property, and have always been categorized as “part of the commercial umbrella,” said REBGV spokesman Craig Munn.
Land sales hit $1.6 billion in the first three months of this year, up 118% from a year earlier. Some of these transactions, particularly in Vancouver and Burnaby, are related to speculative plays based on potential high-density residential development.
Recent examples include the purchase of 1335 Howe Street in downtown Vancouver, currently a hotel, where the developer, Townline, has applied for rezoning to build 389 condominiums in a 40-storey tower.