So now the question is: Will adding a $600,000 tax to the purchase of a $4 million home or putting an additional $1.5 million on a $10 million dollar home be enough to discourage foreign buyers and send capital elsewhere? At this point, we can only guess. But Toronto, Victoria, even Nanaimo could be beneficiaries if foreign investors turn their attention elsewhere.
Governments have been trying to slow down the real estate markets for the last four years—first with changes to mortgages and more recently with tax enforcement (50 new auditors and 20 GST auditors) and tax changes. And it looks like there’s more to come with Vancouver’s vacant property tax still being negotiated.
It’s interesting to note that the Bank of Canada, the OECD, and CMHC are all worried about a property bubble while the municipal and provincial government seem determined to pop it.
Those who want lower prices better be careful what they wish for. History makes very clear that serious problems for the economic and financial system occur with sharp price drops in real estate not high prices.
As for affordability, record low interest rates and massive in-migration from other parts of Canada and internationally are still going to be the key variables for a demand that continues to far exceed new supply.
CMHC releases third quarter Housing Market Assessment
B.C. to bring in a 15 per cent additional real estate tax on foreign buyers
What impact will the B.C. government’s 15% foreign property tax have on the market? Virtually nothing if the concern is affordability. There’s no evidence to suggest that foreign buyers are gobbling up entry-level homes.