The B.C. government’s decision to impose a new tax on foreign home buyers would only amount to a desperate show of force, and will actually fail in keeping prices down in the out-of-control Vancouver housing segment.
In an incisive market analysis, Maclean’s
columnist and business editor Jason Kirby argued that the tax—which has led to Ontario authorities now considering a similar levy—cannot convincingly improve the affordability situation hounding Canada’s hottest real estate market.
“The new tax is, relatively speaking, a politically safe and mild measure. It lets the government be seen to be doing something about high real estate prices at a time when polls overwhelmingly show voters want action on the issue,” Kirby wrote. “Conveniently, it also lets the province fill its coffers without the customary backlash that usually accompanies a tax grab.”
“After all, if there’s one tax people can get behind, it’s a tax that targets filthy rich foreigners (the Liberals said the funds will go to new spending on ‘housing and rental programs’),” he added.
Kirby surmised that far from discouraging wealthy overseas buyers, the tax will only force them to find other ways to acquire the much-desired properties sitting inside Canada’s most in-demand cities.
“Will a 15 per cent tax matter to an offshore speculator who is convinced the value of the house he or she buys will grow by double that rate in one year? If $2 million for a rundown bungalow seems reasonable, might not $2.3 million?” the analyst mused. “Might the tax simply be seen as an unfortunate but necessary fee given the alternative?”
Kirby concluded that the initiative is set to fail from the onset because of lenient lending standards, the same factor which has derailed other market-cooling proposals like larger down payment requirements.
“The world is awash in cheap debt, and whether we’re talking about wealthy foreigners or local residents desperate not to be shut out of the market, the siren call of fast-rising house prices is too powerful to ignore.”
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B.C. to bring in a 15 per cent additional real estate tax on foreign buyers