On July 25, 2016 the Province introduced and passed Bill 28 – now commonly referred to as the “Foreign Buyers Tax”.
This additional 15% property transfer taxation became applicable to all residential land sales to foreign entities within Metro Vancouver on or after August 2, 2016 – regardless of when the contract of purchase and sale was entered into.
The province has faced criticism that the new tax was rushed to roll out and that research was not fulsome; reflecting only a 35 day period of data collection (June 10-July 14, 2016) which coincided with already peaked market conditions. The BC government announced last Thursday, that the new tax “raked in $2.2 billion in revenue.” “That’s a billion dollars more than the government had projected”, stated the Financial Post.
The Urban Development Institute hosted a seminar on Friday September 16th, to discuss current conditions and possible long term impacts of the Foreign Buyers Tax. Hard questions were asked – Will foreign buyers go elsewhere? What affect will this have on BC’s economic dependence on real estate?
Tsur Somerville, Professor and Director of UBC Centre for Urban Economics and Real Estate stated, “I think there’s a real risk, if stuff turns south enough and it affects employment levels, then things could get real rough because real estate is such a large part of our economy now.”
“For the optimists, there was Helmut Pastrick, chief economist of Central Credit Union 1, who noted that the market had begun to weaken several months before the introduction of the 15-per-cent tax — but in August, sales for detached homes in some neighbourhoods had plunged by $300,000-$400,000. Pastrick believes any downturn will take three to six months to play out. Then, if the economy remains sound — and here he made note of Metro Vancouver’s six-per-cent rise in employment — the usual market fundamentals would eventually come into play. Prices, he said, should begin to rise by next year. In two or three years, he said, he expects them to surpass present prices.” -Financial Post
As far as the immediate tax windfall, the province has announced that $500 from the property tax will fund housing affordability and another would go into the BC prosperity fund for future generations. While the liberal MLAs are breaking out “into a spontaneous conga line through the legislature” over the success of this taxation, the hard questions surrounding the numbers remain unanswered; just what percentage of foreign buyers already had unconditional contracts in play when the tax was initiated August 2nd?
London Pacific’s Ben Williams says, “To determine with certainty what affect this tax is having on sales and foreign buyers, we need to see results stemming from new contracts of purchase and sale post FB tax implementation…and this could mean waiting for the end of Q4”.
Read the latest on this subject HERE