Free Money: BC taxes foreign purchases of real estate

The BC government has decided to tax foreign purchases of real estate:

Foreigners who buy residential property in the Vancouver area will have to pay an extra 15-per-cent tax as part of a B.C. government plan to slow the foreign speculation that many blame for making the region’s homes the most unaffordable in Canada.

The change to the province’s property transfer tax announced on Monday means an extra $300,000 in taxes for people from abroad buying a home for $2-million. Detached houses in the area typically run around that or higher. The surprise move comes after the government tracked all residential real estate transactions across British Columbia over four weeks in June and July and found foreign citizens who were not permanent residents bought just more than a billion dollars worth of property.

Read the full article at the Globe and Mail.

Odd that this tax applies to Vancouver only and not the whole province. Why that particular limitation? Will this push buyers into other areas of the province or simply “keep home ownership within the grasp of the middle class in British Columbia” as ms. Clark puts it?

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Johnson
Guest
Johnson

Garth’s panties are in a knot over that 15% tax that may slow foreign inflows. Read his post today and see the tone.

donald t
Guest
donald t

Foreigner just spent 1B in a month in Vancouver.
Tax 50% of the profit when sell, and 10X Property Tax during ownership.
Got them by the balls.

You can call it no fair, but when
Vancouver school has to cut the Music Programs due to lack of funding, has anyone say anything?

Words from DT

trackback

[…] Franko sees it as a positive for affordability: […]

Gnomes of Zurich
Guest
Gnomes of Zurich

The distraction endures
The few are sacrificed
While the many gorge
On the opiate of the money conjurers
And the pyre burns
Higher and higher
Until the day the masses grasp
The fire is fuelled
By our bodies

elvince
Guest
elvince

And how is 15% a large tax anyway? Price up 30% in a year. Even if current sellers offer to pay the tax (lower price by 15%) that’s still a 15% growth in price yoy. Just a couple years of 15% and nobody can buy a house…

elvince
Guest
elvince

That’s a tax on no-fucking-body. How many foreigners who bought huge mansions aren’t citizens or PR? The problem isn’t their status, the problem is that they don’t live here for tax purposes. And for that purpose, it should be an annual capital surtax on assessed value, not a one-time transfer tax.

Best case scenario is that some people don’t understand that nobody’s getting taxed by this and panic, but that’s really just banking on emotion, it doesn’t change any economic fact.

patriotz
Member

“The problem isn’t their status, the problem is that they don’t live here for tax purposes.”

Actually most are legally resident for tax purposes but don’t report appropriate income.

“And for that purpose, it should be an annual capital surtax on assessed value, not a one-time transfer tax.”

Exactly, and this is Davidoff’s criticism. Christy is exploiting the belief that foreign buyers are the problem when they are really a minor part of it.

Newcomer
Member
Newcomer

The influence of emotion has drowned out economic facts for so long in this market that they are almost irrelevant.

BubbleTea
Guest
BubbleTea

Krusty is trying to look good as if she is doing something about it but the fact is RE in Vancouver is popping. The questions is how bad will it get.

Boombust
Guest
Boombust

Exactly.

Kim
Guest
Kim

The other thing is the market may already have been cooling. Money flowing into luxury real estate in SF, NYC and London have basically stopped.

BubbleTea
Guest
BubbleTea

Breaking News from SCMP: Chinese corruption prosecutors seek death penalty for mother of Wanting Qu, pop star girlfriend of Vancouver’s mayor.
Qu Zhang Mingjie is accused of embezzling 350 million yuan in a real estate scam in Harbin, where she was a city official.

More corrupt officals to flee to Vancouver?

Kim
Guest
Kim

Robertson should be investigated for corruption, that guy is as dirty as he look

BubbleTea
Guest
BubbleTea

“The accusations against Zhang are grave – she is accused of embezzling about 350 million yuan (C$69 million), in a real estate scam that reportedly left hundreds of impoverished farm workers in appalling conditions.”
http://www.scmp.com/news/world/united-states-canada/article/1995249/chinese-corruption-prosecutors-seek-death-penalty#

elvince
Guest
elvince

Link?

Royce McCutcheon
Member
Royce McCutcheon
Diadora
Guest
Diadora

What a circus Vancouver has become wth these mainlanders.

southseacompany
Member
southseacompany

“OSFI tells some banks to test for sharp drops in Vancouver, Toronto housing markets” CBC News
http://www.cbc.ca/news/business/osfi-stress-test-1.3695691

“Some of Canada’s banks must stress test their ability to withstand a 50 per cent drop in housing prices in Metro Vancouver area and a 40 per cent drop in the Greater Toronto Area, the country’s banking regulator says.”

Kim
Guest
Kim

Mother told me her neighbor’s house in south Vancouver was put up for sale for 2.6 million, 6 years old, two units in downstairs to rent. Has been on market for several weeks with no offers. This would have gone quick a few months ago. Sellers are Chinese (mainland) whose son moved out and rent barely covers mortgage. Father works at an average wage job and mother does not work. Their son is no longer helping them with the mortgage and they want to get equity to help son with his mortgage.

Another new build on small lot near her in south van, on market for 1.6-something, no buyers, priced reduced by only 50k.

Not sure if this means anything but I think sellers have been mispricing their homes, probably egged on by their respective realtor

Boombust
Guest
Boombust

I have also noticed a lot of SFH, etc. sitting unloved and unsold for long periods of time out here in the Cpquitlam/Port Moody area.

Diadora
Guest
Diadora

Lots of houses under construction in vancouver (there are 4 on my block), will be on market very soon to add to supplies. Perfect timing for listings to go through the roof.

Specuskeptic
Member

Realtors will tend to lowball vs. overshoot on price – easier sell = easier (faster) commission. *see famous chapter of “Freakonomics”

Kim
Guest
Kim

Then they must really be misreading the market if 2.6 million is a lowball!

BubbleTea
Guest
BubbleTea

The media has showed that thousands of corrupt people and money has enter Canada from China. Is it not time to stop all immigration from China and start deporting the bad apple back to China.

Loon
Guest

The problem is bigger than the government thought:

Of the transactions between June 10th and July 14th in Metro Vancouver, 9.7 per cent involved foreign nationals.

Vancouver is at 10.9 per cent, Richmond is at 18.2 per cent, and Burnaby is at 17.7 per cent.

Yowza !

http://www.news1130.com/2016/07/26/real-estate-transactions-metro-vancouver-foreign/

Ooooh Weeee
Guest
Ooooh Weeee
yvr2zrh
Member

Listening to the open mic on the CBC feed right now waiting for Mike De Jong to come out. Everyone is on the mic live – crystal clear. They don’t realize they’re on TV right now – or at least on a live internet feed. They have the numbers and are seriously shocked. Also shocked at how completely 2-faced the government has appeared. i.e. – First there is no problem with foreign money – -to – we don’t know how much – to we don’t want the foreign money. They have said there were $885 million in 5 weeks. That’s just crazy big. Crazy . . This must be like 500 deals or more. They should be careful what they say as they are live on the internet.

Boombust
Guest
Boombust

Which numbers are they “shocked by”? The June RE results?

yvr2zrh
Member
The $885 million in foreign investment in Vancouver in 5 weeks. That’s a totally insane amount. That’s pretty much equivalent to a new 25 story condo tower in a week. Basically on an annual run-rate that will support the commissions for aounrd 1,500 average real estate professionals . . Crazy – – Ultimately – this tax will be successful if it does the following 2 things. 1.) Does not actually raise any money (because it stops foreign investment) 2.) Causes prices to fall by around 30% (which is not that far from where we are). I spoke with my discretionary portfolio manager in Vancouver earlier in the month and asked the question about real estate. “If the Chinese money stops coming – what will happen?”. They said “The market will basically crash because there is nothing else supporting it”. I… Read more »
Ooooh Weeee
Guest
Ooooh Weeee
BubbleTea
Guest
BubbleTea

Try 50 to 80% instead as figures mention by Marc Cohodes

Slava
Guest
Slava

It will be back to late 1990’s prices when all is said and done.

ttul
Member

Cue the shit show in 3, 2, …

HAMster
Guest
HAMster

Will Garth publish a retraction or correction for his post yesterday that was full of errors concerning the facts of this tax? Some posters pointed out his mistakes but he ignored all of them.

Slava
Guest
Slava

This bought and paid for Free-Mason Gatekeeper Pied Piper Garth Turner has officially lost all credibility. That goes for all his absurd in-house boomer nicks/personalities circulating in his “comments” section.

Dave
Member

Why do people read Garth Turner? What has he gotten right in 10 years? I should get into the business of fear. Seems easy.

Or in other words, don’t expect facts to get in the way of fear mongering.

Dave
Member

I think the Liberals deserve some credit for actually taking action on the housing issue. Full disclosure, I’m a party member, but I didn’t think they would do much beyond talk. It seems like Christy has heard the message and is working on it at multiple levels. I recognize that’s not enough for everybody, but at least there is some action.

I was even thinking of voting NDP because one solution would be an economic downturn and loss of confidence. If things don’t improve by next year, I think this might be a good option.

Oracle
Guest
Oracle

We know that it’s the record number of foreign students who are getting PR that are the root of this problem.

End that if you are serious.

bullwhip29
Guest
bullwhip29

in due time it will be obvious this was a bunch of talk with very little action taken or enforcement after the fact just as we saw with the whole shadow flipping fiasco. as long as the crooked lawyers and agents are allowed to run free there will be no way to clamp down on such activity. imho there will also be increasing pressure from the industry and local population who have a vested interest in keeping prices propped up and non stop complaints from those that think taxing only certain jurisdictions in unfair. we will see how that plays out…

Oracle
Guest
Oracle

Record immigration will make sure prices go higher. Here is what’s happening:

1) foreign student comes to study in Canada. Gets PR. Then buys house with Dads money. All family comes over while business continues to run in China.

It’s this money that caused spoke in prices. Caused by Christy Clark doubling foreign students.

Need to eliminate this.

yvr2zrh
Member

The number of foreign students getting PR is not a very high percentage of the total. Also – while they are here, they can not buy without paying the tax – they have to wait until they get PR – which can be quite a long time (first student visa – then work visa – then PR application – could be 5 years or more).

bullwhip29
Guest
bullwhip29

as luck would have it, mike de jong has all his eggs located just outside of greater vancouver and wont be affected by any of this (or least not in a negative way)

patriotz
Member

I think De Jong and other property owners in the Abbotsford area will be the big winners, as the government has established it as a tax-free zone right on the edge of Metro Vancouver. I think there will be big rush of local speculators trying to get in before the Chinese, even if the latter don’t materialize. Also Abby has an international airport which fits in to the Richmond II image.

victoria
Member
victoria

I more I read about it I don’t think this tax is going to do anything. I hope I am wrong. BTW – I can’t seem to vote? Is there something I am missing.

ostritch
Member
ostritch

I can no longer type. It’s like I’m on dial up. I type, one second later, the letter appears.

victoria
Member
victoria

I am wondering will they start buying in other areas like Victoria?

ostritch
Member
ostritch

Yes Victoria. But that is already underway.

bullwhip29
Guest
bullwhip29

in early spring things began to go ape$hit (after being in ECG flatline literally for years) on the island, sunshine coast and elsewhere where prices have jumped 30-40% in many cases just in the last few months. imho word was clearly out a long time ago as was the fact that vanc would be taxed (as evidenced by the recent parabolic runup right out of left field in advance of the announcement)

LS in Arbutus
Guest
LS in Arbutus

I wanted to point out that there are anti-avoidance measures in the legislation. An Anti-Avoidance Rule is typically a statutory rule that empowers a revenue authority to deny taxpayers the benefit of an arrangement that they have entered into for an impermissible tax-related purpose. Soooo I guess you can still gift your wife/kids money to buy a house, but you generally much more shenanigans than that would be caught in this type of rule. They are very wide sweeping these rules.

Combat roach
Guest
Combat roach

Sounds like the biggest challenge is how to outsmart creative Chinese but not to offend them anyhow. Holly fuck, what mess this country ended up…

bullwhip29
Guest
bullwhip29

biggest challenge is actually how to outsmart the general public while keeping the doors open for the chinese. as i said very few will wind up paying this tax

patriotz
Member

I don’t know what you’re getting at, because there are very few cases where the husband has not obtained PR while the wife and kids have. Either the whole family would be foreign buyers or the whole family wouldn’t.

Also note that the new tax doesn’t apply to permanent residents or Canadian citizens who live outside the country.

LS in Arbutus
Guest
LS in Arbutus

I am thinking of the case where the UBC student (an adult) bought a $31 mansion in Point Grey. Anti avoidance wouldn’t probably capture this because a parent can gift money to his/her kids. But if you think you are going to buy a house in your cousin’s or friend’s name, this will not fly if the underlying tranx is that it’s your house. Actually same with the adult kid scenario, if you treat the house as yours, that is ultimately take the proceeds on a sale back for yourself, then this was to circumvent the rules and the anti-avoidance rules would kick in.

ostritch
Member
ostritch

Unf. Chinese kids are guilted into doing what their parents say. It’ll be in their name until their parents make them sell it and gift the money back.

patriotz
Member

“I am thinking of the case where the UBC student (an adult) bought a $31 mansion in Point Grey. ”

If they buyer is here on a student visa, they have to pay the tax. If they are PR or citizen, they don’t.

I think you’re unclear about what anti-avoidance means. It’s about using resident proxies or shells to avoid taxation. But if someone who is a PR or citizen buys a property without any assignation to anyone else, they don’t pay the tax. It doesn’t matter where they got the money.

LS in Arbutus
Guest
LS in Arbutus

Thanks but I am quite clear what anti-avoidance means. That said the rules themselves can be complicated. Also, fraud, for tax purposes, is not statute barred.

yvr2zrh
Member

Hey LS – – The thing that few people have noted is that this student is actually either Canadian or PR as they have lived here most of their life and are a gifted virtuoso Pianist. They are a “Piano Student”. However – the 1% owner on paper is probably the 100% owner in reality. . . One good thing however is that essentially if they catch you being the “trustee” for some other beneficial owner – they will assess the tax anyway – subject to 6 year audit period – and the Canadian citizen and PR is on the hook for the tax if the foreigner does not pay.

ostritch
Member
ostritch

IF there is an audit done. Big IF even with 50 whole inspectors now for all of Canada. Even Ian Young noted how laughable that was.

bullwhip29
Guest
bullwhip29
This is too little too late and really only equates to a lowering of the speed limit (from 300 km/h to 275) in gr vanc only. Very few foreign buyers will wind up paying this tax as there are surely countless loopholes remaining and likely little enforcement if someone insists on driving over the speed limit anyway. By the time the general public recognizes this the election will be over. For now (and very cleverly) Chrusty has possibly earned herself a brownie pt or two for appearing to take action. As others have mentioned, this new tax will fan the flames on mkts outside of gr vancouver, which is surely an INTENDED consequence and probably known well in advance by close friends and associates judging by the action we are seeing on the island, the interior, the sunshine coast and… Read more »
Oracle
Guest
Oracle

Best thing that can happen to Vancouver Real estate is a Trump win.

It will cause a severe recession in Canada and people will lose their jobs.

Then the anti-immigrant sentiment rises and YVR prices will then fall by 75%.

Count on it.

Slava
Guest
Slava

The main reason the working class are voting Trump is his initiatives on Chinese and Mexican Made Goods selling and flooding the USA, and Canada BTW.
Basically if you want to sell in the USA, produce it in the USA. Otherwise you can still sell it in the USA, but with a 34% duty.
Imagine all the Chinese Factories going belly-up after this rule is in force!
And no more money to run away with to buy Greater Vancouver Lower Mainland Residential real estate as it will be non-existent.

Then guess what happens to this “market” where the residential real estate is currently priced for these Off Shore Investors?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName
“main reason the working class are voting Trump” Maybe you are right but I tend to doubt it. The reason is that I don’t think the working class tended to be very good at or consistent in boycotting made-in- China products, way back about 20-25 year ago when it was easier and potentially effective to do this. For awhile the idea to do that was out there — it wasn’t some esoteric idea a few intellectuals had — it was out there in the more general populace. But not enough people pursued it or stuck with it. It’s true that in the U.S. sometimes Walmart would come into a small town and just destroy the little grocery store, the little hardware store, the little bakery etc. But more resistance could have been put up. They didn’t have the will. They… Read more »
Slava
Guest
Slava

Trump was saying the exact same thing back in 1990 in his Playboy Magazine Interview! Back then he had no ambitions to become US President
You can bet that he will institute the 34% duty on Chinese Made Goods!
And you can bet that that all the multi-nationals like Apple, etc will comply in order to keep making the obscene profits that they do, even by making or assembling their products in the USA!

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

Go into that big high end store where Sears used to be. Find on the rack thinks with the Ivanka Trump label made in China

Slava
Guest
Slava

Yes. Trump explained that he played and plays the game in order to stay competitive as a businessman. You are in business to make money, not to lose money by proving a point. But as the rule-maker, when elected, he will create the new boundaries, that all companies, including his will have to follow.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

“as the rule maker”
See this is just the problem. In the US system the president is not the rule maker. A more democratic method would be a widespread boycott. It would not be a mere symbolic gesture (to “prove a point”) for any committed to the idea of the will of the people. A real leader who believed in it would have helped to make it work.

Slava
Guest
Slava

Trump will institute the 34% duty on Chinese and Mexican Made Products! That’s for sure, as he will have the power to do so.
Wait and see….

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

Trump is a loose canon, an unhinged narcissist who does not read, reflect, or analyze. It is a mistake to support his candidacy. I understand the temptation — to do so is a way of sticking up the middle finger to the status quo politicians — but he should not be anywhere near that little red button under any conditions.

I\'m With Stupid V
Guest
I\'m With Stupid V

Yet you probably upvote all of BPOM et als ramblings here. Ironic?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

How would you know that?

Anyhow, BPOM is a special case. As far as I can tell, his or her mind doesn’t work like any self-proclaimed Trump supporter I have observed in other contexts.

I\'m With Stupid V
Guest
I\'m With Stupid V

Explain. I am very interested.

Boombust
Guest
Boombust

What a selfish and IDIOTIC thing to say.

Ooooh Weeee
Guest
Ooooh Weeee
MarKoz
Member