The B.C. government’s imposition of a 15 per cent tax on foreign buyers of residential properties might have been intended to moderate Vancouver’s overheated market, but the city’s real estate board has raised the alarm on the possibility of more than 400 deals going south because of the tax.
Real Estate Board of Greater Vancouver president Dan Morrison noted that at least 427 transactions worth approximately $404 million (based on the $946,945 average foreign buyer’s expense) will get derailed, reported Bloomberg News
And while Morrison added that the full effects of the tax would take years to manifest given that many of those deals involve condos are still under construction, other industry players have already made grim predictions of the near future.
Re/Max Holdings Inc. regional executive vice president (Western Canada) Elton Ash warned that the new tax would impact not only foreign buyers, “but also Canadians who had contracts to sell and had already put offers on their next house.”
“It’s a domino effect,” Ash said.
The levy—which came amid intensifying calls of stronger government intervention in cooling down the Vancouver housing market—has proven controversial, with one observer even saying that the tax violates multiple agreements and treaties between Canada and at least 28 other nations, such as the North American Free Trade Agreement (NAFTA) with the United States.
“It’s just shocking that a provincial government in Canada would choose to have a knee-jerk reaction in this way,” Appleton & Associates managing partner Barry Appleton said.
Appleton, who has initiated several claims under the NAFTA as an international law practitioner, said that affected individuals or states could also sue Canada for any losses they may incur because of the tax.
The B.C. finance ministry countered that nothing about the tax is unconstitutional.
“The government received opinions on the additional property transfer tax and we believe British Columbia is within its rights to act as it did to protect the residential real estate market from distortions,” ministry spokesperson Jessica McLachlin stated.
The benchmark price of a detached home in Vancouver swelled by 38 per cent year-over-year in July, up to $1.58 million.
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