Subhed: New measure described as easy to sidestep
Photo 1: A Vancouver home . . . foreign buyers blamed for skyrocketing prices.
Photo 2: BC Premier Christy Clark . . . under pressure to act.
Vancouver: Doubts are already being expressed about how effective the B.C. government’s new 15% tax on foreign buyers of Metro Vancouver residential properties will be.
Under increasing pressure from people living in Canada’s most expensive real estate market, Premier Christy Clark’s government announced the new tax earlier this week.
The new, additional property transfer tax of 15% on homebuyers who are neither Canadian citizens nor permanent residents will take effect Aug. 2. Another measure will allow the City of Vancouver to tax vacant homes in its jurisdiction.
While the move is being met with overwhelming approval in that region, there are also doubts over whether this and other policy changes will do much to bring housing prices down.
For one thing, housing industry professionals contend that it would be relatively easy for foreign buyers, many of whom are allegedly from Mainland China, to sidestep the tax by simply registering a citizen or permanent resident as the purchaser.
“It is not inconceivable that many of these buyers already have kin or friends who are citizens or permanent residents, and who would be willing to be listed as the buyers,” said one real estate agent who wished to remain anonymous.
He said that the additional 15% would also probably not serve as a deterrent where cost is concerned.
“Remember, these are people who have lots of cash to spare. Paying 15% more might not be much of a problem for them, and would only serve to inflate house prices even more.”
The new tax could also end up driving the money coming into B.C. now to other parts of the country, some reports suggest.
“With any tax change, there may be some unintended consequences. For one, the move may shift foreign attention to other markets in B.C., such as Victoria, or elsewhere in Canada,” said Michael Dolega, a senior economist with Toronto-Dominion Bank, in a note released Tuesday.
“Even prior to the new policy announcement, we believed that foreign investors had already begun to gravitate to the more affordable Toronto market. As such, prices in Toronto could see some significant upside pressure in the coming months as foreigners look to new markets.”
The latest public opinion poll from the Angus Reid Institute finds Metro Vancouver residents are very supportive of these efforts – and view them as a step in the right direction – even as they remain dissatisfied with the way both local and provincial governments have responded to soaring housing prices.
Nine in ten residents of Greater Vancouver (90%) support the new tax on foreign buyers, and a similar number (87%) would support their local government asking for the power to tax vacant homes
Seven in ten (71%) say affected buyers will find loopholes enabling them to get around the new tax, while relatively few say either measure will be “highly effective” at bringing prices down or opening up more housing inventory
Fully eight in ten (82%) say the provincial government should have intervened in the housing market sooner, including three-quarters of those who voted for the B.C. Liberal Party in 2013
The provincial government had insisted for months that it did not want to punish foreign buyers or do anything that might discourage overseas investment.
So It’s a bold move by Clark, who was acutely aware of how politically damaging the issue was shaping up to be for her government with an election less than a year away. Poll after poll showed the public was furious over the widely held view that the government was doing nothing to mitigate the impact of foreign investors on the housing market, while the middle-class dream of home ownership became a distant reality for more and more young people.
The B.C. government may have modelled this new measure on a similar measure in effect in Singapore.
