Non-resident purchases of real estate in Vancouver will now have to pay an additional 15% land transfer tax. The decision has divided the industry -- with many claiming such a move is overdue, and others arguing it will have little to no impact.
Dr. Sherry Cooper, chief economist of Dominion Lending Centres
, weighs in on some of the prevailing concerns.
“One concern is enforcement. The new tax, which is quite hefty, amounting to $300,000 on a $2 million property, could be difficult to enforce as foreign buyers might circumvent the tax by having Canadian residents buy on their behalf,” Cooper said in her latest commentary. “It is suspected that many foreigners already buy properties through local residents. B.C. said it would introduce measures to prevent foreign buyers from bending the rules and threatened stiff fines – $100,000 for individuals and $200,000 for corporations – for those who don’t comply.”
The new tax will go into effect August 2 and will apply to buyers who are neither Canadian citizens nor non-residents.
However, many argue the tax will be skirted by many.
“Another issue is effectiveness. Other jurisdictions have introduced measures to limit or reduce foreign real estate investment, but the impact of these measures is uncertain. We don't know just how price sensitive foreign investors might be,” Cooper said. “We do have anecdotal evidence that some foreign purchasers have driven up residential real estate prices very rapidly, especially in multiple-bidding situations, with little concern for inherent value. It is doubtful that the new transfer tax, even at 15%, will render housing dramatically more affordable in the Greater Vancouver region.”
Many industry stakeholders have also voiced concerns that this new tax will encourage additional foreign money to flow into Toronto.
It remains to be seen if Ontario’s government will take its own action.
One leading industry economist weighs in on the concerns around Vancouver’s pending tax on foreign buyers.