Chinese Investors Driving Up Metro Housing Prices

[lio45]

Originally Posted by retro_orange

You may have just reported yourself. It's more then likely at least one Canadian government employee reads this thread. Just an FYI, i copied all that too.

You don't need to worry for me, I have done absolutely nothing wrong.

Plus I'm pretty sure the following SSP regulars, kwoldtimer, niwell, Acajack, all have pretty close ties to the federal government (if they don't directly work for it). And they've already seen my posts in the Canada forum housing thread stating my opinion that this tax is likely easy to circumvent legally.

If anything, I'm contributing to helping the BC govt by pointing out it will likely be easy to do. I've even given them a suggestion that IMO would work better for their goal of stopping the flow of cash from the PRC, twice already (in the other real estate thread).

A tax (say, 15%) on all real estate purchases, but any buyer (corporation or individual) who manages to qualify for, and who takes, a standard loan (say, at least 65%) from a Canadian bank, gets an exemption and the tax is waived. If the loan is repaid too early, the tax applies; BC notaries wouldn't be able to lift a mortgage from a title without also notifying the government.

As I pointed out already, the only loophole I could possibly see in this is if banks manage to be more flexible than I think they are. I have witnessed plenty of times that just because you have a lot of free and clear assets, if you don't meet certain income ratios, you will just absolutely not be able to get a mortgage. But the possible loopholes here is that banks could, in exchange for a few million in cash held for the duration of the mortgage, introduce a special mortgage type with special conditions that would approximate to cash buying. This quasi-simulated mortgage would allow a buyer to evade the tax. But I think that loophole could be closed reasonably easily.

[Cypherus]

Originally Posted by lio45

I don't know about BC but in Quebec you can earn your first $800,000 free of any capital gains tax (and the govt is looking at raising that bar to $1M). Since part of that exemption comes from the federal government, it's got to apply to BC (haven't checked, but I would assume so). Which means that it would only be a problem if you're using the same relative several times. I would assume the guy with the money will make it worth the relative's while, in any case...

Also, alternatively, you can very well have your student relative living in the property (as a resident owner). Works even better.

On a typical $3M Vancouver house, we're talking about pissing away $450,000 for no good reason unless you use a loophole; believe me, it's a very strong incentive.

We'll have to wait and see, but I'd be extremely surprised if this tax worked as intended.

The life time capital gains exemption of $800,000 only applies to qualifying small business corporation shares or qualifying farming or fishing property. It doesn't apply to anything else. BC does not have a capital gains exemption.

http://www.cra-arc.gc.ca/tx/ndvdls/t.../lgbl-eng.html

[Cypherus]

Originally Posted by lio45

BTW, I have absolutely no personal incentive to research loopholes in this law, which is why I can only speak in generalities, but I'm sure that to save half a million bucks these loopholes will be found, refined, and used successfully by nearly every foreign buyer.

Anyway, my Canadian corporation (owned by Canadians) would be glad to borrow money at advantageous terms for all parties from Chinese nationals who have a few millions in cash to spare, if there are any reading this. I'm sure we'd find ways to make it work perfectly legally to everyone's interest.

And FYI, upon resale, it would just be general business revenue, not a personal capital gain, so taxed at business rates.

Any company that borrows money from outside of Canada (Chinese) to buy real estate en masse would be obvious to tax authorities under a BC audit, since the balance sheet would show real property holdings with suspicious business activity (or lack thereof) A simple audit question about where you got the money to buy property en masse would result in 2 years in jail due to anti avoidance, and anyone like a lawyer who acquiesces in the series of transactions would be subject to third party penalties. The CRA on the other hand wouldn't care as long as you report the business income from flipping, and the GST (if it relates to assignment contract flipping for $30,000 or more on new property), but the BC government would be monitoring companies in the BC registry for tax compliance to the PTT.

[bb1510]

If a Canadian relocated to a different country and closed all accounts and is deemed as a non-resident tax-wise, would that individual still have to pay the 15% should they decide to repurchase here?

[Jebby]

Originally Posted by bb1510

If a Canadian relocated to a different country and closed all accounts and is deemed as a non-resident tax-wise, would that individual still have to pay the 15% should they decide to repurchase here?

No, the legislation says only non-citizens and non-permanent residents are liable.

For example, I'm a non-resident of Canada for tax purposes...in fact, I'm not even allowed to vote in Canada anymore since I've been away for more than five years and have absolutely no intention of ever moving back permanently (although that doesn't stop me from voting), so I wouldn't be liable to pay the tax, even though any additional property I'd ever buy in Vancouver would be strictly as an investment property. Just goes to show how absurd the tax really is.

[WarrenC12]

The levels of government that are making these tax changes are using the tools at their disposal:

1. The city can control property tax
2. The province has levied a PTT

The missing link here is purchase or transfer taxes that are then linked to tax credits on income declared to CRA. Only the federal government can control this.

[Cypherus]

75% drop in sales since tax rollout.
http://globalnews.ca/news/2861138/me...ement-realtor/

PS: I had a family member over-bid $135,000 using money from an estate for a menial townhouse in Langley. Suggestions that foreigners actually represented at least 75% of real estate purchases in Metro Vancouver is being thrown around. However, I am glad this tax, even if it becomes ineffective, will have social affects to local irrational buyers who are bidding up homes out of fear of not getting into the market. Looks like things will cool down in the interim.

Note that when this happened in Australia, prices ended up rebounding due to normal supply/demand.

[whatnext]

Originally Posted by Cypherus

75% drop in sales since tax rollout.
http://globalnews.ca/news/2861138/me...ement-realtor/

PS: I had a family member over-bid $135,000 using money from an estate for a menial townhouse in Langley. Suggestions that foreigners actually represented at least 75% of real estate purchases in Metro Vancouver is being thrown around. However, I am glad this tax, even if it becomes ineffective, will have social affects to local irrational buyers who are bidding up homes out of fear of not getting into the market. Looks like things will cool down in the interim.

Note that when this happened in Australia, prices ended up rebounding due to normal supply/demand.

It would be interesting to note if any locals are backing out thinking the market is going to drop in a substantial way. Risky strategy if so.

I'd guess it is more realtors trying to scare the BC Libs with "the sky is falling" tales.

[jlousa]

I can confirm that a lot of locals are cancelling their contracts too not just foreigners. The markets hate uncertainty and that's what the government has created.

[Caliplanner1]

If (construction/real estate) jobs, house equity and housing affordability falls (due to both inadequate housing construction/supply and flat demand from a sluggish local economy characterized by low wages) Christy Clarke could be in for a rough political ride come next elections.

[Sheba]

The Canadian Housing Boom Fueled by China's Billionaires

After copious warnings over the last six months, including from the Bank of Canada, that price gains are unsustainable, the provincial government of British Columbia moved last week. Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes.

As Canada waits to see what effect, if any, the moves may have, here are the stories from the city's wild ride.

It's a bit long but an interesting read.

[whatnext]

Originally Posted by jlousa

I can confirm that a lot of locals are cancelling their contracts too not just foreigners. The markets hate uncertainty and that's what the government has created.

The whole uncertainty thing is being overblown. What's certain is that foreign buyers will be subject to a 15% tax. If we look at Hong Kong's nearly identical implementation of such a tax there was a slight cooling of the market.

It seems to be realtors (apologies if you are one) are trying to whip up some fear and pressure on the gov't. Now, with apologies to connect2source and other realtors on the board , there are good realtors but there are also many who have gotten rich over the last couple years without having to do the work. List it and it sells, no local market knowledge or insight added for the hefty commission paid. A return to a sane market will separate the wheat from the chaff.

People forget that even if there was a "catastrophic" price collapse that basically takes us back to 2014. Anybody here feel terribly poor and hard done by then? Too many people bought into our version of Tulip Mania and felt they had won the lotto.

[Vin]

New measures will cool off the housing market but won't make prices drop drastically, and probably won't make a dent for housing price in many areas.

As for those who think that a collapse will happen soon, then I guess you are one of those who think the same way since 1999, including that time of the dot-com crash, 9-11, financial crisis of 2008 and recent China's bad economic forecast and stock plunge. Prices kept going up, so, stop predicting anything already.

[bb1510]

So just watched the Chinese news and apparently the reason for the feeding frenzy and crazy marketplace at the start of this year was because people who worked in the city hall got news out to their friends and family about the 15% tax to be set in august, which then spread wider and wider

[retro_orange]

Originally Posted by lio45

You don't need to worry for me, I have done absolutely nothing wrong.

Plus I'm pretty sure the following SSP regulars, kwoldtimer, niwell, Acajack, all have pretty close ties to the federal government (if they don't directly work for it). And they've already seen my posts in the Canada forum housing thread stating my opinion that this tax is likely easy to circumvent legally.

If anything, I'm contributing to helping the BC govt by pointing out it will likely be easy to do. I've even given them a suggestion that IMO would work better for their goal of stopping the flow of cash from the PRC, twice already (in the other real estate thread).

A tax (say, 15%) on all real estate purchases, but any buyer (corporation or individual) who manages to qualify for, and who takes, a standard loan (say, at least 65%) from a Canadian bank, gets an exemption and the tax is waived. If the loan is repaid too early, the tax applies; BC notaries wouldn't be able to lift a mortgage from a title without also notifying the government.

As I pointed out already, the only loophole I could possibly see in this is if banks manage to be more flexible than I think they are. I have witnessed plenty of times that just because you have a lot of free and clear assets, if you don't meet certain income ratios, you will just absolutely not be able to get a mortgage. But the possible loopholes here is that banks could, in exchange for a few million in cash held for the duration of the mortgage, introduce a special mortgage type with special conditions that would approximate to cash buying. This quasi-simulated mortgage would allow a buyer to evade the tax. But I think that loophole could be closed reasonably easily.

Fyi Just in case:

http://www.cbc.ca/news/canada/britis...wack-1.3709094

B.C. anti-tax crusader sentenced to 5½ years

A B.C. anti-tax crusader, who tax authorities say counselled people to be tax cheats has been sentenced to five-and-a-half years in prison and fined $259,482, according to the Canada Revenue Agency.

Russell Porisky of Chilliwack was sentenced July 29 in B.C. Supreme Court, the CRA said in a news release. It was the second trial for Porisky and his common-law spouse, Elaine Gould, who were first tried on tax charges in 2012.

Full story: http://www.cbc.ca/news/canada/britis...wack-1.3709094

[christmas]

Canada Overwhelmed By 100,000 Chinese Millionaire Immigrants
https://www.youtube.com/watch?v=fTPym5VHI4c

[Jebby]

Originally Posted by christmas

Canada Overwhelmed By 100,000 Chinese Millionaire Immigrants

We should be welcoming every single millionaire that wants to move to Canada and bring their money with them.

[whatnext]

Originally Posted by Jebby

We should be welcoming every single millionaire that wants to move to Canada and bring their money with them.

So said from Mexico City.

But why stop there? Let's roll out the welcome mat for Russian oligarchs and African dictators too.

[Jebby]

Originally Posted by whatnext

So said from Mexico City.

I'm a Canadian citizen, so what if I'm currently living abroad?

Originally Posted by whatnext

But why stop there? Let's roll out the welcome mat for Russian oligarchs and African dictators too.

Let me be more clear:

Any millionaire who is not inadmissible according to the Immigration and Refugee Protection Act (people engaged in human rights violations, organized crime, health reasons, security risks, etc) should be allowed to move to Canada and bring their money with them.

[Vin]

Originally Posted by whatnext

So said from Mexico City.

But why stop there? Let's roll out the welcome mat for Russian oligarchs and African dictators too.

Are you implying that 99% of money from foreign investors are dirty money then? If you are convinced, then show us some proof. What about money earned by hardworking immigrants and foreigners, who, say own factories that make the very computer that you are using at the moment, or that affordable microwave that your mom just used to warm up your milk this morning? Are you saying foreigners who make their millions doing honest hard work don't exist? Painting these Chinese investors as all corrupt officials is, again, smells of racism.