Vancouver, one of the hottest housing markets in North America, is getting a tougher for wealthy Chinese buyers.
British Columbia Finance Minister Carole James announced measures targeting foreign buyers and speculators in the first budget, in a follow-up to her campaign pledge of making housing more affordable for residents of Canada’s Pacific Coast province.
Effective February 21, foreigners will now pay the province a 20% tax on top of the listing value, up from 1%. A levy on property speculators will be introduced later this year, according to budget documents released earlier this week.
The government will also crack down on the condo pre-sale market and beneficial ownership to ensure that property flippers, offshore trusts, and hidden investors are paying taxes on gains.
Premier John Horgan is facing formidable demands after taking power in a fiercely contested election last July. His New Democratic Party made expensive promises to topple the Liberals, whose 16-year-rule brought the fastest growth in Canada, but also surging property while incomes stagnated.
Public outrage has intensified amid perceptions that global capital seeking a stable sanctuary, especially from China, is driving double-digit gains in Vancouver, the country’s most expensive property market.
“The expectations that we will do everything in our first budget are huge,” James told Bloomberg. “Our goal is fairness – fairness for the people who live here, who work here and pay their taxes here.”
Anger has been further stoked by fresh media reports alleging that Vancouver casinos and real estate have become vehicles in recent years for laundering the illicit proceeds of high-rolling Asian gamblers and drug dealers with links to the Chinese fentanyl trade.
Read more: B.C. government to move against money laundering in real estate
“We’re taking steps to counter tax fraud and money laundering – that starts with closing loopholes and better access to information,” James explained. The province has asked the federal government to create a multi-agency group to target tax evasion, money laundering and housing, according to budget documents.
James said new measures are intended to “moderate” the surge in housing prices. The new speculator tax takes effect this fall and will apply to foreign and domestic investors who don’t pay income tax in the province, starting at 0.5% of the property’s assessed value in 2018 and rise to 2% thereafter. Primary residences and homes leased as long-term rentals will be exempt.
“B.C.’s real estate market should not be used as a stock market. It should be used to provide safe and secure homes,” said James. “That’s why we’re cracking down on speculators who distort our market.”
The levy, she said, will also capture “satellite families”, a term with Chinese origins to describe those families where the breadwinner remains in the home country while the children and spouse reside abroad to take advantage of educational and employment opportunities.
James also vowed that investors flipping pre-sale condos will have to pay tax. Developers will be required to collect ownership information on the selling and re-selling of contract assignments in new buildings, and the data will be shared with tax authorities.