Chinese Investors Driving Up Metro Housing Prices

[a very long weekend]

one would hope that a foreign investment tax would scare people out of the shadow markets and speculative bubble. it'll help at the margins overall, but could really have a giant impact on the west side SFH market. then again, the surest way to kill the china-based shadow exchanges is simply to rezone the inner ring of SFH hoods (fairview, kitsilano, etc) back to what they were in the 1970s.

[cornholio]

Here we go! A 180 by the BC liberals, the data they have must be brutal.

So here is what is new as of today.

1) August 2nd onwards all foreign buyers in Metro Vancouver will pay a 15% property transfer tax surcharge on residential property purchases. That's a extra 150k for every 1mill in purchase price. A foreign buyer is anyone who is not a citizen or permanent resident and any corporation that is not in corporated in Canada or has one or more foreign owners/share holders

2) City of Vancouver can charge a empty property tax

3) The real estate industry will no longer self regulate

A start. *the tax can move between 10 and 20% based on the reaction of the market and the proceeds will go towards a housing fund. If this was in place last month the BC government would have already collected a extra 150 million dollars between June 10th and July 14th alone.

http://www.news1130.com/2016/07/25/b...oreign-buyers/

[Vin]

Very good news indeed. I guess the surcharge of 10-20% would be the same for any home values, including those under a million. Would be good if they can charge across the board. And are they standard for all municipalities, and who determines the number that can fluctuate between 10-20%?

[cornholio]

Originally Posted by Vin

Very good news indeed. I guess the surcharge of 10-20% would be the same for any home values, including those under a million. Would be good if they can charge across the board. And are they standard for all municipalities, and who determines the number that can fluctuate between 10-20%?

Good questions. I assume the rules will be the same within Metro Vancouver to start and probably easy to expand to other parts of the province, and I assume the tax rate will be manipulated within the legislature for now until some new body is created to take care of it. Also curious as to what they mean by permanent resident. Are they looking at residential status for tax purposes or residential status for immigration purposes. I am hoping its the latter not the former but this is a very important detail.

Regardless this is going into effect next week so its done and done. Nice and quick as these sorts of changes need to be to catch everyone off guard so as to reduce market volatility. Everyone now has less then 5 business days to close their sales before this takes effect, which although less perfect then having no warning is a fast enough implementation. As a side benefit speculators will see how quickly the rules can change, in a matter of days. The lesson, don't speculate on residential real-estate. Having this take effect at midnight on BC days is also nice symbolism.

[Caliplanner1]

............expect a possible spike in both purchases by foreigner investors and their local (citizen/PR card holding) surrogates/proxy and applications for permanent residency (by said investors) over the long term.

[Rocketeer]

Does anyone know if this legislation is retro-active i.e applies to pre-sale purchases completing after August 2nd?

[cornholio]

Originally Posted by Caliplanner1

............expect a possible spike in both purchases by foreigner investors and their local (citizen/PR card holding) surrogates/proxy and applications for permanent residency (by said investors) over the long term.

How so? Purchasing through a proxy is extremely risky. Speculating just got more difficult because the government just showed they can change the rules with no warning and they are now taking a close look at the market.

This will definitely reduce foreign speculation and speculation in general. The only unknown is to what extent. This is also just a symbolic start and can be looked upon as just a precursor of things to come. There is no clearer way to say if you speculate on residential real estate you are playing with fire. Previously speculators felt safe. That is no longer the case.

I will give you one thing though. It will be a busy next 4 days as people try to finalize and close sales.

Originally Posted by Rocketeer

Does anyone know if this legislation is retro-active i.e applies to pre-sale purchases completing after August 2nd?

Great question. It would seem that it would be retroactive so to speak. Pre sales are not actual sales they are just agreements to buy upon completion. If a foreigner bought a pre sale today and the completion date was next year then they would presumably be paying the 15% transfer tax next year .

[WarrenC12]

Originally Posted by Rocketeer

Does anyone know if this legislation is retro-active i.e applies to pre-sale purchases completing after August 2nd?

The new rate would apply, since the actual land transfer does not occur until post-Aug 2nd.

Same thing for the earlier PTT rate changes announced earlier in the year.

[Caliplanner1]

Originally Posted by cornholio

How so? Purchasing through a proxy is extremely risky.

That depends on how "risk" is defined by the buyer......using family members or close business associates seeking to get away from even riskier foreign markets/jurisdictions might prove to be less of a deterrent.

[bb1510]

Christy Clark is clever at achieving nothing but in an attempt for good PR.

The majority of "foreign" purchasers in the 6-20m market while generally don't have Anglicized names, are already citizens or are PR's.

Basically what this tax will do in regards to the housing market is nothing while generating buzz around Christy to citizens that she can help "cool down" the market in hopes to get re-elected and gain donations.

Also, isn't this great timing to announce this after stating that she'll move to Victoria a few months ago and it just so happened that her house was listed back then?

[cornholio]

Originally Posted by bb1510

Christy Clark is clever at achieving nothing but in an attempt for good PR.

The majority of "foreign" purchasers in the 6-20m market while generally don't have Anglicized names, are already citizens or are PR's.

Basically what this tax will do in regards to the housing market is nothing while generating buzz around Christy to citizens that she can help "cool down" the market in hopes to get re-elected and gain donations.

Also, isn't this great timing to announce this after stating that she'll move to Victoria a few months ago and it just so happened that her house was listed back then?

They just released a study on this. Many people assume it was massaged and under-counted the numbers (i.e. it ignored corporations, trusts, the last day of the month, was only 19 days, etc. most people in the industry laughed at the numbers). Anyways in Burnaby and Richmond still over 10% of buyers were foreign in those 19 days in June of this year. Those foreign buyers paid a AVERAGE of 1.35 million per home. Not 5 to 6 million. 1.35 million. And that is average, not median. Therefore its safe to assume the median is actually much lower since those 5 to 6 to 30 million dollar homes skew the average up while you can only go so much lower then the 1.35mill.

What is the average benchmark price of a home in Metro Vancouver again?

http://www.theglobeandmail.com/news/brit...t-some-dispute-the-data/article30842015/

[bb1510]

Originally Posted by cornholio

They just releases a study on this. Maybe you were not paying attention. Many people assume it was massaged and under-counted the numbers (i.e. it ignored corporations, trusts, the last day of the month, was only 19 days, etc.). Anyways in Burnaby and Richmond still over 10% of buyers were foreign in those 19 days between June of this year. Those foreign buyers paid a AVERAGE of 1.35 million per home. Not 5 to 6 million. 1.35 million. And that is average, not median. Therefore its safe to assume the median is actually much lower.

What is the average benchmark price of a home in Metro Vancouver again?

http://www.theglobeandmail.com/news/brit...t-some-dispute-the-data/article30842015/

There's a reason why I quoted the above stated 6-20m price bracket - these prices are typically assumed to be purchased by foreigners but they are not; the majority of these buyers hold PR cards or are citizens.

I don't disagree with you that the median is much lower and that the percentage of foreign buyers is that number; that is the fact.

However, what I'm saying is that the attempt to cool down the market will be negligible with this tax. 10% won't affect the market that much in the long term since the majority of them are considered citizens.

Further, this tax just serves to satiate the desires of citizens. When people see non-english speaking individuals touring and purchasing property, they very well assume that such individuals are "foreigners" (in this case, I'm defining them as non-citizens or residents).

Take a very high profile project being built in the downtown for example. The developer stated that the majority of the units were purchased by locals. However, I can attest to the fact that 90% of the purchasers don't speak english as their first language.

The majority of the buying power of the local real estate market are from individuals funded by once foreign funds.

[Jebby]

Can't foreigners just use a BC-registered company to buy the property to get around this ridiculous tax?

[giallo]

^That's exactly what I was thinking. There seems to be a few loopholes to get around this.

[bb1510]

Not only that; students are able to purchase without paying the tax. Parents will just purchase under their children's names.

Like I said, this is just a marketing ploy for Christy and her team.

[csbvan]

Originally Posted by Jebby

Can't foreigners just use a BC-registered company to buy the property to get around this ridiculous tax?

They could use a BC company if listed on a Canadian stock exchange to get around the tax. Otherwise a BC incorporated company controlled by a foreigner, whether partially or entirely, would be subject to the tax.

[csbvan]

Originally Posted by bb1510

Not only that; students are able to purchase without paying the tax. Parents will just purchase under their children's names.

Like I said, this is just a marketing ploy for Christy and her team.

Doubtful.

[Jebby]

Originally Posted by csbvan

They could use a BC company if listed on a Canadian stock exchange to get around the tax. Otherwise a BC incorporated company controlled by a foreigner, whether partially or entirely, would be subject to the tax.

You're correct. That loophole doesn't exist. Here's the text of the bill:
https://www.leg.bc.ca/Pages/BCLASS-Legac...pages%2F40th5th%2F1st_read%2Fgov28-1.htm

[cornholio]

Originally Posted by bb1510

Not only that; students are able to purchase without paying the tax. Parents will just purchase under their children's names.

Like I said, this is just a marketing ploy for Christy and her team.

Assuming that by pernament resident they mean pr for immigration purposes then international students would not be exempt from this tax.

[Jebby]

What if a foreigner gets a job offer from a Vancouver company and wants to buy a house in town? Would they have to pay the tax?