One expert’s reaction to the housing industry’s newest policy

One expert’s reaction to the housing industry’s newest policy

One expert’s reaction to the housing industry’s newest policy One leading industry economist weighs in on the concerns around Vancouver’s pending tax on foreign buyers.

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.
  • Omer Quenneville 2016-07-27 9:53:00 AM
    The tax is meant to be "hefty". It would have to be hefty to be effective. My concern is not the tax, those that have the ability to bring money over to purchase real estate can afford to pay it. My concern is what will be done with the tax revenue. It should be used to open the door to residence needing access to the market. In Toronto with the double land transfer tax many are not moving simply because they can't afford the double land transfer tax causing listing supply to be low. Removing the provincial land transfer tax and replacing it with this non-residence tax would provide incentive to the trade up market and would increase the available properties for sale. Increased inventory would slow the market down.
    Post a reply
  • Warren Ross 2016-07-27 9:54:39 AM
    It's pretty sad that with the new tax in Vancouver, and a suggested tax for Toronto, there is no suggestion of the possibility of increased foreign investment in Quebec. Our property values are a third of Vancouver prices.
    Post a reply
  • Rick Robertson 2016-07-27 10:41:43 AM
    There are several challenges with the "Canadian resident buyer" theory. A couple being: current proof of down payment requirements would make the transaction cumbersome, and capital gains tax would apply to that Canadian resident's income at the time of the property sale/transfer.
    Post a reply