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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Already
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Already
YVR
Guest
YVR

LOL the rush to the exits has started. Listings will double in August.

Sellnoworbepricedin4evah
Guest
Sellnoworbepricedin4evah

That ad freaks me out. On first read I thought it was a lark. On 2nd and 3rd read I think it’s real.
Mostly though what freaks me out is $24k a year (taxable) income (less taxes, upkeep etc) for a $1.5 mill house.
How long does that take to pay off?….your lifetime.
God help you if property value goes down.

Sellnoworbepricedin4evah
Guest
Sellnoworbepricedin4evah

Oops. My bad. He thinks the basement alone will garnish $24k a year. Or $2k a ,month.

Rolls
Guest
Rolls

realtor selling before prices go higher he tell me as he feels guilty doctor and lawyer cant afford crack shack even with suite income

squeak
Member
squeak

Well, that should be easy to fix: Stop being stupid being a lawyer or a medical Dr. Go and study hard to become a realtor.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

squeak has perfect response ^^^

Insane
Guest
Insane

Uh-uh, that’s what happens when MONEY and HIGH FINANCE has become STUPID! Don’t listen to the crony capitalist Gov’t, we are living in hyper-inflationary times. We’ll be paying soon astronomial pricesfor fresh produce unless you eat out 3x day for McD and the cronies will tell you inflation is in check!

Loon
Guest

Time for Vancouver Price Drop to fire back !

Boombust
Guest
Boombust

Wow. A steal. I’m goo goo ga ga.

Boombust
Guest
Boombust

That dumb house pimp will lose it all…

BigDaddy
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BigDaddy

Funny how the governments is unconcerned if the money is dirty or otherwise.

Already
Guest
Already

Over asking is over, soon we’ll all be saying man ….people were paying how much over asking with no inspections? wackos

Hyper-mega-Bull
Member
Hyper-mega-Bull

the return of home inspections. that’s pretty much the only thing bears can hope for at this point.

bullwhip29
Guest
bullwhip29

in a perverse way this new tax will make market for tear downs (requiring no insp) and vacant land for that matter even more attractive as the transfer tax will only apply to the purchase of the site (not what you ultimately build on it)

ostritch
Member
ostritch

Oh no. Do you mean if you want to sell your house to HAM, you can still do it, but you have to knock it down first? is that the loophole. Oh my God that’s going to fuck up the west side even worse. it’ll look like Athens.

Tcg
Guest
Tcg
So even without this tax, I’m seeing the rush to the exits. As I’ve written, our landlords have listed our place in Fairview for sale and I believe they are selling their other properties as well. My parents who are renters in Coquitlam were just notified that their landlord is listing their place tomorrow and another acquaintance just advised he is listing his Coquitlam townhouse on Monday. Maybe it’s coincidence but it seems all of a sudden mm surrounded by people selling. Our next door neighbours just unloaded their place and are renting in North Van now, another friend recently sold his place in White Rock and is a renting in Van and told me his brother-in-law who builds high end houses in West Van has been struggling and has decided his current build will be his last… I’ve been… Read more »
Boombust
Guest
Boombust

You’ll do just fine. It’ll be a little short term pain for a LOT of long term gain. Many people will be wiped out in this implosion; you’ll be still standing because you NEVER BOUGHT INTO THE HYPE.

Already
Guest
Already

Prices and rent will revert to the mean…..patience

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

I feel very similarly.

The scene was described so very well here: http://www.vancourier.com/opinion/chinese-investors-shutter-vancouver-neighbourhood-while-apologists-cry-racism-1.388750

So much damage in the intervening four years.

HAMster
Guest
HAMster

A couple we know sold their house in Langley earlier this year and moved to Vernon.

Time to go
Guest
Time to go
This is exactly the same position we are in. Our landlord wants to cash in, so she put it up or sale. She’s asking an insane amount, but I don’t blame her if some greater fool will give it to her. We just found a new rental, same price, but one less bedroom. It’s crazy the rents people are asking for now and some of the new apartments we’ve looked at are what I deem as too small to be liveable for a couple. No closet space, double bed fills bedroom, kitchen bleeds into living room etc… Plus, what’s with the amount of fully furnished rentals out there? I don’t ever remember there being so much of that stock. Anyway, there has been a very noticeable change in the people living in my building over the last 6 months. We’re… Read more »
Newcomer
Member
Newcomer

By now, everyone knows a few people who have sold and switched to renting or are trying to do so. This has to be putting pressure on rents.

patriotz
Member

“This has to be putting pressure on rents.”

What happens to a the house they sold?

Newcomer
Member
Newcomer

In the short term, it sits empty. That is why rental supply is low, despite low population growth and steady housing-stock growth: there is an increasingly large pool of unused housing out there. I would expect the stock to become supply at some point (probably when paper appreciation is not so high as to make collecting rents seem like more trouble than it is worth).

patriotz
Member

I very much doubt that even 10% of houses sold sit empty. Also some sellers leave the metro, as other posters have pointed out.

Newcomer
Member
Newcomer

10% is massive with a sub 1% vacancy rate — In any case, I’d be interested in hearing your thoughts on the sudden surge in rents. I have been monitoring rents for years and looking hard since March, and there has been a jump of 25 to 30% this year. I can’t explain that without turning to supply and demand. But if you have a theory, I’d love to hear it.

patriotz
Member

I think AirBNB is responsible for a lot of housing being taken off the rental market. Also I think a lot of people are staying in houses that are bigger than they need, e.g. after kids move out. I think these factors are bigger than houses being being sold and left empty outright by the buyer.

Newcomer
Member
Newcomer

AirBNB is definitely a big part of it but I wouldn’t discount empty units.

vangrl
Member
vangrl

AirBnB and Empty homes. I’d say that far more than 10% of sales on the West Side sit empty, or are in the process of being demolished. And all those older homes had basement suites

vangrl
Member
vangrl

and yes the “furnished rentals” are out of control. Everyone is trying to get the most $$$ possible and filling suites with a grand worth of IKEA.

Tcg
Guest
Tcg

I am seeing a lot of furnished, luxury stuff managed by real estate/ property management companies. I am wondering to what extent the rental market is being manipulated by them. Only when rents are so high does it make sense to buy at current ridiculous prices.

cvdr
Guest
cvdr

Hong Kong put implemented a similar tax a while back and it was supported by a majority of HK residents.

http://vancouversun.com/news/staff-blogs/hong-kong-puts-15-per-cent-tax-on-foreign-buyers-will-b-c-follow-suit

patriotz
Member

I would call it similar if it applied to HK island only. Christy wants to eat her cake and have it too, i.e. be seen to be “doing something” in Vancouver while keeping the floodgates open and directing the money to Abbotsford and points east – which is where her greatest electoral support is. And get extra revenue from foreign buyers who just have to buy in the taxable area.

victoria
Member
victoria

Again Patriotz you hit the nail on the head.

Slava
Guest
Slava

What Christy and others possibly fail to understand is that if her tax does not solve the “problem” there is no hope in hell for re-election.
It is only about the “problem” being solved. End.

franko
Member
Active Member
franko

The province taxing foreign buyers.
The city taxing vacant properties.
The CRA going after tax evaders.
It all would have been unthinkable a year ago, but the biggest hit by far will come from China clamping down on money fleeing the country.
HAM is soo over….and it will lead the stampede to the exit.

Rolls
Guest
Rolls

FYI im the car business and sale of Rolls and Bentleys have stopped in the past 2 months.. coincidence? remember greed ran this bubble up fairly fast but fear will pop It faster than a teenager with pimple on prom night

MikeS
Member
MikeS

Wow! Westside Realtor got a new job?

ostritch
Member
ostritch

That’s because the Chinese president stopped the outflow of money in March. These new taxes will be the sight and sound of white people chasing their own debt around with a big stick.

southseacompany
Member
southseacompany

“This Is When the Fed Will Probably Raise Interest Rates”, Fortune
http://fortune.com/2016/07/25/fed-janet-yellen-interest-rates/

“I don’t expect any movements on interest rates until December”

“The data doesn’t support raising rates this week. The next two Fed meetings—late September and early November—are simply too close to the presidential election for any moves to take place. The Fed doesn’t want to be accused of playing politics, and a move in September or November could be interpreted as just that.”

Rolls
Guest
Rolls

Pauls calculator jambed with sooo many new listings

ttul
Member

Can’t wait to see Paul’s stats in the next few days… Should be a real shit show.

yvr2zrh
Member
I will say that we should all truly appreciation that Paul comes here to provide us the simplest of data points. They are important and can show trends. When he comes back (from answering 300 phone calls) it would be interesting to hear his perspective on this, especially since the transition of the tax will kill a lot of contracts (for which ultimately, it is a foreigner who is backing out and it will be tough to sue to force the purchase to close). If we are on a run-rate of around 200-300/week – and it takes 2 weeks to close, we could have 500 transactions that don’t close – which will result in 500 people, not selling their home at the price they thought (or at all perhaps) – meanwhile – they have committed on another purchase – so… Read more »
MarKoz
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Active Member

Foreign speculators could avoid paying the tax by getting friends or family who are permanent residents to buy on their behalf. Or the tax may lead to inflated housing prices in cities such as Victoria, Kelowna or Toronto, he added.

A group of more than 40 local economists led by Prof. Davidoff is proposing the government not “drag nationality” into the housing debate, but rather focus on whether people owning homes in this market also earn their money in the region. Prof. Davidoff’s colleague Joshua Gottlieb said such a tax would be more accurate and efficient than the government’s new tax.

Oracle
Guest
Oracle

Canada land fro Canadian Citizens only.

Try the politicians who sold out metro Vancouver for treason.

AngryLemming
Guest
AngryLemming

I’ll do it. You pay me to put my name on title. 2 years later, I will sell and dissapear to Kelowna. Benefits to you? Avoiding the 15% taxes. Benefits to me? My commission, and the full value of your property. Any takers?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

Isn’t that the kind of arrangement that results in violence in case one of the parties does not carry out his part?

MarKoz
Member
Active Member
Ooooh Weeee
Guest
Ooooh Weeee
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.

Boombust
Guest
Boombust

What a selfish and IDIOTIC thing to say.

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.

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 »
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….

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!

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 »
LS in Arbutus
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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.

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.

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.

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.

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.

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

victoria
Member
victoria

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

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)

ostritch
Member
ostritch

Yes Victoria. But that is already underway.

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.

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.

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.

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).

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.

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.

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.

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.

Ooooh Weeee
Guest
Ooooh Weeee
ttul
Member

Cue the shit show in 3, 2, …

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.

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
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/

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