Foreign buyers in Vancouver will be paying more for investment properties this month (beginning August 2). The Canadian provincial government of British Columbia has enacted a 15 percent real property transfer tax on foreigner-purchased properties in Metropolitan Vancouver, adding $300,000 to the cost of a two-million-dollar home. The tax is the response of Premier Christy Clark’s government to data indicating that foreign absentee buyers have been driving up home prices past the point of their affordability to native B.C. residents. Recent data showed that foreign buyers spent more than CN$1 billion on B.C. property in just five weeks, 86 percent of it in the Lower Mainland. “People who use housing solely as a means to make money rather than living and working in Vancouver should be taxed as such,” Vancouver Mayor Gregor Robertson is reported as saying.
As recently as last fall, the Clark government had steadfastly denied that foreign purchases were a significant driver of home price inflation in the region, instead attributing higher prices to limited supply, high domestic demand, development regulations, and low interest rates. Hence, officials including B.C. Finance Minister Mike de Jong had dismissed any notions that foreign buyers be targeted for disincentives, as was being advised at that time by Canada’s then Prime Minister Stephen Harper. Harper had reportedly said, “Some reports have suggested that speculative foreign nonresident buyers are a significant factor in driving homes out of the price range of average families, especially in Vancouver and Toronto. If speculators are driving up the cost of housing to unaffordable levels, that’s something the government can and should address … Other countries, like Australia, have put in place regulations that limit the ability of foreign buyers to purchase existing houses for investment purposes.”
Indeed, the restrictions enacted by Australia in 2010 appeared harsh. Those rules prohibit nonresident foreign investors from buying existing homes, and this constraint can only be lifted if they plan to redevelop or build new housing. Relief for temporary residents may be approved by the government before they purchase or build a home; but once approved, such residents can only purchase that one property for their personal residence while in the country. Once it is no longer their primary residence, they must sell it within three months. Yet despite the severity of the law, observers had reported no meaningful reduction in demand in recent years.