Vancouver BC, new 15% property transfer tax

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Vancouver BC, new 15% property transfer tax

Scott Breier
Investor · Langley, British Columbia · Member since 2016 · 21 posts · 0 votes

So in light of the new news of the 15% property transfer tax for foreign investors, how does everyone think this will impact the real estate market in the lower mainland? As I understand, this includes all the Metro Vancouver cities up to Abbotsford, so will this drive all the action there and other nearby cities like Victoria, Kelowna, etc? Will we see a drastic reduction in housing sales and therefore a drop in prices?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Josh Evans  I bet it curtails US investors or those that want a second condo etc in your fabulous city.  I can see a run on Kelowna Merritt Kamloops  !!! 

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  • Edison Reis
    Rental Property Investor · Kelowna, British Columbia · Member since 2015 · 136 posts · 54 votes
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    @Scott Breier,

    Is too early to tell but don't expect housing pricing to decline outside the greater Vancouver area. In matter of the fact I think it may go up even faster. "Buy and lock" investors will have to beat the bushes and seek for opportunities in Victoria or in the BC interior in general.  (yes, buy and lock as several investors from Asia tend to buy real estate and sit on them for years)  

    Nevertheless time will tell. (I would estimate noticeable changes in the real estate buying behaviour by the end of the year)

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  • Josh Evans
    Investor · Vancouver, British Columbia · Member since 2015 · 11 posts · 4 votes
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    I think it is a bit of a deterrent, but I don't think this new tax will do much other than fatten the political pockets. It is not going to deter the investors to the point that prices are going to significantly drop and the government doesn't want that. Imagine how many people out there will lose their shirts if their house price drops 25% as quickly as it went up - especially those who just got into the market or refinanced. RE is a huge portion of BC's economy and it would be in trouble if prices took a sudden downturn.

    When you consider that many of the properties being sold here are going for up to 25% of the asking price (ex. SFH being listed at $800K and sold at $1MM), I don't think a few hundred thousand dollars will mean a whole lot to foreign buyers on a $2MM home. Also, the tax strategy seems to be full of loopholes. For example, a foreigner can buy property here in a registered Canadian corporation or an international student registered as a permanent resident, at say UBC (where there are thousands of them), can purchase property without paying the tax as well. The people who are bringing their offshore money here have a lot of it and it won't take much to find a good lawyer who can steer them clear of these taxes if it is a concern.

    I think the government has been planning this tax for months, but has just introduced it now as sales have begun to slow. They need to keep that budget surplus from the PTT coming in and taxing foreigners will do just that for them. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Josh Evans  I bet it curtails US investors or those that want a second condo etc in your fabulous city.  I can see a run on Kelowna Merritt Kamloops  !!! 

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  • Joel Sherlock
    Kelowna, British Columbia · Member since 2016 · 61 posts · 108 votes
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    I agree with Jay above, I believe it will drive some of the US second home buyers, including UK and European buyers to other markets like Kelowna and Victoria. 

    Re a huge sell off in Vancouver I don't see it, the tax may slow down the appreciation slightly but in other markets it has not kicked off a massive sell off in prior instances. Australia for example implemented a larger tax for foreign investors and the results were not catastrophic. 

    Vancouver unfortunately remains "affordable" on a global scale, some international buyers will continue to buy and pay the tax as needed. I do hope it stifles the growth slightly as it is becoming increasingly impossible to afford a home for those who want to live in Vancouver. 

    However there are many markets in global cities where home ownership is not looked at like a right, many in New York or Hong Kong accept that the prices and the market may lead them to be renters.

    Only time will tell what the Vancouver market will do as it seems to continue to baffle even the smartest economists. 

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  • Josh Evans
    Investor · Vancouver, British Columbia · Member since 2015 · 11 posts · 4 votes
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    I agree with you @Jay Hinrichs. US investors may lose interest in Metro Vancouver as the CAD will basically be back on par with USD as this tax is almost the same as the currency spread. US investors will continue, and may look even harder, at investments in Kelowna, Victoria and ski resorts like Whistler, Big White and Silverstar. However, US investors are not to blame for the rapid rise in real estate prices in metro Vancouver - they make up a very small portion of those foreign investors.

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  • Luc Boiron
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    10y

    I'm not in BC, but I don't think this will do much. Many people think that there is a problem with too many foreign buyers, but much of the time they aren't actually foreign.

    People anecdotally look at a neighbourhood and see that there are many people of Chinese descent there. They think this means that are foreign buyers. Likely though, the majority of these buyers are permanent residents or Canadian citizens, so this won't affect them.

    We're a very multicultural country, and some people seem to forget that many of these Asian buyers are simply new Canadians, not foreigners. This is likely the government trying to appear as if they are doing something, without actually changing anything.

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  • Scott Breier
    OP
    Investor · Langley, British Columbia · Member since 2016 · 21 posts · 0 votes
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    My thought process is the pretty well the same. I imagine it shouldn't effect the investors with the deep pockets but may push other foreign investors to other parts of the province. I must say (even though it's somewhat expected) that I've been seeing a lot of doom and gloom articles about the metro Vancouver area since this new tax came out....

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  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
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    I wonder what the population migration has been from U.S. to Canada and how that has changed since 2007...

    Was this tax planned to coincide with Trump and the current political turmoil in the U.S.?

    I was already considering Vancouver, but if Trump wins that may push me over the edge and the border :-)

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  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    10y

    @Jon Q.

    This levy has little to do with the U.S.A. and nothing to do with Trump - neither are significant factors in the residential real estate market in Vancouver at the moment.   The tax has more to do with money exiting Asia (China / Hong Kong predominately) looking for a safe place to live and absentee owners.

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  • Pawan J.
    Developer · Vancouver, British Columbia · Member since 2014 · 122 posts · 26 votes
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    What a great conversation and so many good points. Agreed this will do little to the housing market in vancouver BC, as it was mentioned the foreign buyers are generally buying over $2m and so a few less sales, if at all will do little to the average house. The CRA does look at companies with majority foreign ownership more closely but setting up a Holdco would only be for very wealthy buyers buying many properties to make the structure worthwhile. Politically they needed to do something and hence followed suite with other countries like a Australia, (where I am from) which it did little for the local market and average joe who still cant afford a house and many rent for life. Foreign investment there also doubled last year from china alone and prices continue to rise again and again. Most of these buyers are simply getting money out of their country due to instability and hence a few extra points over 5-10yrs is not a deterrent. Vancouver is still affordable on a global scale and is such a great city that I see things only going up and up!
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