Seller raises price then offers tax discount to foreign buyers.

Here’s a good way to get your listing in the news:

One Metro Vancouver realtor says he will cut the sale price of his own Richmond home by 15 per cent for any international buyer, in a response to the province’s new levy against foreign citizens who want in on the region’s overheated housing market.

Eddy Chen says a person from Mainland China was in the midst of completing the paperwork on the purchase of his $1.98-million house last week when the government announced its new tax, which comes into effect Tuesday. The buyer walked away after the government’s surprise announcement because they could not get a home inspection or mortgage approved fast enough to avoid an extra $298,000 brought on by the new levy, he said.

“They said they don’t think it’s fair to foreign buyers, so they want to wait and see what happens [to the market],” he said. “There’s no point for them to rush it through, because they thought they were ripped off by those extra taxes.”

Now, he has upped the price to $2.35-million, but says he will take 15 per cent off for any foreign citizen hit by the new property transfer tax so they “have an equal opportunity to get the property.”

Thank goodness there’s still a sense of decency and fairness in the world.  Read the full article over at the Globe and Mail.

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[…] –Return to normal mortgage rates would crush Canadians –Prices driven by lending, not foreign investors –Sales drop, prices rise –Media runs big headlines around buyer tax –Will tax work-arounds lead to lost property? –Will collapsed deals end up in court? –Anecdotal panic –The google docs data spreadsheet –Eby seeks inquiry into tax info leak –Government will intervene – […]

BubbleTea
Guest
BubbleTea

This could be interesting…
Combat-tested U.S. bombers headed to Pacific. CNN

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[…] far the tax has mainly provided marketing opportunities and  big headlines of a 75% drop in sales even though most sales haven’t been recorded yet. […]

Dave
Member
10-15,000 sales pulled forward? Ya, that foreign money was a small percent of the market alright. The tide is going out and we’ll find out who’s been swimming naked. For the sake of speculation… let’s dig into that number. How many existing pre-sales would there be in GVRD? 100,000? That’s probably generous because I think there are about 30,000 apartments built per year and most aren’t buying three years out. But let’s call it 100,000. How many sales were unable to complete in July that wanted to for every sale that did? Definitely at least 1:1. Probably more like 2:1 or 3:1. Call it 1:1 and that’s foreign money at 20-30% of the market. 2:1 would be 40-60%! Consider that a lot of this foreign money is being parked here with people living overseas. How many didn’t even hear about… Read more »
david
Guest
david

So realtors out in force complaining that many of their deals are now “collapsing”.

Why would that be, oh Einsteins of Commerce? Because these buyers are precisely the foreign, never-heading-to-Canada, money launderers that the law was meant to stop.
D’uh.

Shut It Down Already
Guest
Shut It Down Already

it’s also causing local-to-local deals to collapse.

Dave
Member
Now that I have had a bit of time to let this tax sink in, I think it will have an impact. It’s not the tax so much as the knowledge that the government will now intervene into a hot real estate market. In the 2008/2009 stock crash, when the Fed intervened and made it clear they would continue to do so, it was called the Bernanke Put. That caused markets to rise because the regulators put the bottom in. Similarly, the Provincial government has now signalled that the top is in… the Christy Call. Let’s say prices rise another 30% next year, you know the government will make more moves. For example, if prices keep rising heading into the next Provincial election, the NDP and Liberals will be fighting over more how best to pop the bubble. I think… Read more »
vangrl
Member
vangrl

Great summary, you could apply this to the areas that aren’t getting taxed (Victoria, Kelowna etc..), the Gov has the ability to change their minds at any time and apply the tax there. Just knowing that, may prevent these areas from taking the heat right away.

patriotz
Member

“If you believe current valuations reflect supply and demand, then carry on.”

Prices always reflect supply and demand. What matters is whether you think demand is speculative, ie. based on the belief that prices will keep rising.

Kim
Guest
Kim

Rents reflect supply and demand, if you take housing for what it is, a place to live and not flip. Rents are up but nowhere crazy like San Francisco, where a 2 br median rent is 5k usd.

Dave
Member

Yes, but I meant to say local demand.

patriotz
Member

Good summary. I would also add something that I think is very important – by making the first move on taxing foreign buyers, Christy has thrown away the race card, leaving the NDP free to propose tougher rules, which they will surely do if the market is not falling by next spring, without the usual suspects being able to credibly accuse them of racism.

Dave
Member

From a political point of view, I wonder if Christy acted too early. If prices keep going up, she failed to stop the bubble. If prices fall, then home owners are going to be upset. If she did it 3 to 6 months out from the election, neither outcome could affect her. But, this far out and the market has time to play out.

I’ll give her credit though for making a couple much needed moves, which seems to be a rarity in politics.

BubbleTea
Guest
BubbleTea

Too early? Its too late. should have done something 3 years ago when market was heating up with rumors of Mainland Chinese from China overbidding on everything trying to launder their money through RE. That’s why there is over 90% agreement on this tax. It’s much too late for Krusty and I may cost her the election.

Dave
Member

I agree. I am just talking about the political timing. She could have said, ‘we’re studying it’ or created a task force to come up with recommendations and then do something in January.

southseacompany
Member
southseacompany

“This is the main driver of Toronto and Vancouver home prices (and it’s not foreign investment)”, BuzzBuzzNews

http://news.buzzbuzzhome.com/2016/08/driver-toronto-vancouver-home-prices-not-foreign-investment.html

““Despite tighter rules on amortisation periods and down payments, the loan-to-income ratio on new insured mortgages has soared,” he continues.”

““What has really changed in the past 12 months is not a big increase in foreign buyers, but a further decline in interest rates, which has allowed lenders to relax lending standards even further,” says Ashworth.”

Dave
Member

No doubt this is a huge factor. When Poloz cut rates twice I predicted this wouldn’t end well. That cheap money immediately went into real estate valuations in an already heated market.

If the market turns over, I think people eventually blame him for having pumped the bubble.

It kills me that none of our politicians are talking about the Bank of Canada and interest rates. They should collectively tell him that if he cuts rates again, the PM will replace him. They need to raise rates 1/4 to 1/2 right away IMO.

Oracle
Guest
Oracle

The cause of high house prices is foreign money in to the detached housing markets of metro Vancouver.

Local money is not buying the $2 million+ properties.

Eliminate that and the house of cards collapses.

Newcomer
Member
Newcomer

A friend just sold his place in Burnaby for 2M. The buyers were multi-generation Canadians of Italian heritage. They sold a place in East Van because they wanted a larger place. This is the typical deal at the moment.

Shut It Down Already
Guest
Shut It Down Already

Local money is spending the same on average as foreign money. The stats show this.

Dave
Member

That’s a little tautological. Local and foreign money but into the same market so they pay the same prices more or less.

Shut It Down Already
Guest
Shut It Down Already

If foreigners were only buying at the high end and locals were only buying at the low end (as in not taking on crazy debt loads out of greed) you’d expect to see a marked difference.

Dave
Member

The stats also show only 3% of transactions are foreign buyers, which we all know isn’t the case. That’s probably off by a factor of 10, so I don’t think anybody really knows what these numbers actually are.

Newcomer
Member
Newcomer

Underwater in the Las
Vegas Desert, Years
After the Housing Crash
More than eight years after rotten loans and plunging home values made Las
Vegas the center of the housing crisis, thousands of people have yet to recover.
http://www.nytimes.com/2016/08/03/us/las-vegas-2008-housing-crash.html

Newcomer
Member
Newcomer
space889
Member
space889
Was up camping in Squamish this long weekend and the place was overrun by mainland Chinese. The topics is all about the tax and laments about having to pay the 15%. But already, advices, strategies and referrals are flying about avoiding it. And the enterpreneural spirits unleashed by the end of communism has already smelled business opportunities offered by this tax. Also, the REMax office is swarmed by eager Chinese tourist buyers looking at investment & development opportunities. Rents are also going up to cover the extra cost due to the tax. Lastly, many are turning to places outside of lower mainland now. This tax has forced Chinese to look elsewhere for opportunity and boy did they find out what they have been missing. All I can say is better hurry and visit BC before Chinese buy it up, development… Read more »
Newcomer
Member
Newcomer

“Rents are also going up to cover the extra cost due to the tax.”

Oh, really. So people don’t mind paying double or triple what the get in rent on mortgage payments, but they will be able to jack rent up 15% to cover a tax that impacts 10% of the market. A friend of mine just started a lease on a place that was recently bought for 2.5 M. His rent, 4 K. I guess places like that will be going for 4K + 15% now 🙂

Oracle
Guest
Oracle

Do you realize that continued dominance by a foreign group will eventually wake up the locals…Door will be shut down on Asians. Learn History.

As an South Asian myself, you have no idea what you’re promoting.

92% of people don’t want foreign buyers as per recent polls. How long before 92% don’t want chinese immigrants? Think hard.

mls watch
Guest
mls watch
southseacompany
Member
southseacompany

“The REALLY Big Short: The $13.7 Billion Dollar Bet Against Canadian Banks Over Housing And Insider Sales”, Better Dwelling

https://betterdwelling.com/the-really-big-short-the-13-7-billion-dollar-bet-against-canadian-banks-over-housing-and-insider-sales/

“t’s no secret that smart money has been piling into bets against the Canadian housing market, but now it’s reaching an epic scale. A little digging revealed that more than $13.7 billion in short bets are being placed against Canada’s big 5 banks”

HAMster
Guest
HAMster

Someone asked for a youtube link to the guy living in China, so here it is:
https://www.youtube.com/watch?v=0gJ0nfQ9dEU
He has various videos posted, so you can look through them to get a feel for the way life is over there.

southseacompany
Member
southseacompany

“San Francisco housing prices are now above previous bubble levels”, Business Insider

http://uk.businessinsider.com/san-francisco-housing-prices-above-previous-bubble-levels-2016-8

“Housing prices in the San Francisco Bay Area are so insane, we have tech workers living in vehicles in company parking lots, people building “pods” in living rooms so they can live there with some privacy, and microscopic apartments selling for $425,000.”

‘Despite the slowing of the tech boom, there’s no end in sight. As this chart from Statista shows, home prices in the area are at an all time high, passing their housing bubble peak of $665,000, which was set in summer 2007.”

southseacompany
Member
southseacompany

“A Return To ‘Normal’ Mortgage Rates Would Crush Canadians”, Huffington Post
http://www.huffingtonpost.ca/2016/08/02/mortgage-rates-canada-debt-crisis_n_11262930.html

“An analysis by The Huffington Post Canada has found that a return to a mortgage rate of five per cent — the “normal” rate for years prior to the financial crisis — would put severe pressure on many Canadian homeowners.”

“In Toronto, average payments on an average-priced house would rise by $923 per month, from $3,079 to $4,002. In Vancouver, payments would rise by $1,097 per month, from $3,677 to $4,774.”

space889
Member
space889

And 5% mortgage will be coming when???

Kim
Guest
Kim

I’ve said it before and il say it again. US fed will raise rates sooner rather than later. That will force BoC to raise. If they don’t our dollar will plunge even more, making imported goods more expensive and sparking rampant inflation. Net effect is the same, squeezing household budgets.

HAMster
Guest
HAMster

I had a car loan in 1980 at 16.5% from RBC or the Royal Bank as they were known back then.

HAMster
Guest
HAMster

My first mortgage in 1990 was 11.50%

mls watch
Guest
mls watch
mls watch
Guest
mls watch

Good overview of the situation, but the conclusions are not appealing …

Mr Yeeeeee
Guest
Mr Yeeeeee

Australia having similar issue, chinese money tap turned off.

http://www.zerohedge.com/news/2016-08-02/d-day-australias-real-estate-bubble

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE
This following point is taken from G&M made by Working Class Revolution.This is one best i have read on controlling Vancouver RE. 1. Re-Regulate Real Estate as a Special Class of Property: De-license all realtors and brokerages, which are a redundant monopoly. Create a public secure online property registry and tender system for all real estate transactions. All property sales by public tender with public electronic opening of bids. All bids required to be conditional on at least a minimum standard set of due diligence items (inspections, disclosures etc.), to slow down sales. Prohibit assignment (shadow-flipping) and replace with bid bonds (insurance). Enforce disclosure and compliance for identity, residency, citizenship, place of declared income, source of funds legal and Canadian-tax-paid, buyer/seller agency, shadow-flipping prohibition, previous commercial use of property, commission structures, etc.. 2. Reciprocal Property Ownership Limits: Create a new… Read more »
Combat roach
Guest
Combat roach

Right, Canada is flirting with a deadly disease, a cancer of the worst kind. This is not about affordable housing any longer but the destiny and future of Canada. Berlin Olympics 1936 and German pretensions looked quite innocent but several years after the worst horrors became a part of everyone’s life. Apparently lesson hasn’t been learned.

Ohhhhh weeeeeeE
Guest
Ohhhhh weeeeeeE
Combat roach
Guest
Combat roach

As time goes by all these talks about China stopping the capital flight sound more and more as a complete bullshit. Neither their corrupted communist government is capable to stop it, neither it would be possible to do anything like that in the society where fraud, deception, cheat and corruption are essential attributes defining success. It is hard if possible at all to undermine a rock-solid fundament that system is built upon.

patriotz
Member

Vancouver condo marketer denies he knew about foreign-buyer tax

I hope Bob has a rear view mirror on this bike, backpedaling at that speed can be hazardous.

Best place on meth
Guest
Best place on meth

Everyone calling into CKNW this afternoon as well as the hosts of the show believed he had insider info.

Even if he’s telling the truth (unlikely), in the court of public opinion he’s already a dead man.

Bag it and tag it
Member
Bag it and tag it

I don’t recall popcorn ever tasting this good

paulb
Member

New
380
Sold
151

TI:9084

http://www.paulboenisch.com

Lurker
Guest
Lurker

How come the total inventory hasn’t changed?

Bag it and tag it
Member
Bag it and tag it

Can anybody (preferably Paul) confirm what are classified as ‘sales’ for these stats? Is it title transfer/registration (ie. close date) or is it an accepted offer after subjects are lifted? There was some discussion on this last week but I don’t think there was any consensus.

Shut It Down Already
Guest
Shut It Down Already

This has been discussed lots of times. For example, http://vancouvercondo.info/2010/05/friday-free-for-all-111.html

Google is your friend.

Bag it and tag it
Member
Bag it and tag it

OK then…considering all the stories of the sudden drop off in sales since the tax was announced, I would imagine this will be one of the biggest sales days we’ll see for a long while. I suspect a lot of these sales happened over the weekend and were quick sales which also closed before the tax deadline. I suspect sales will start to tail off dramatically going forward.

Shut It Down Already
Guest
Shut It Down Already

Unlikely that you’d find a lawyer working past 4pm on a weekday let alone at any time over a long weekend.

Newcomer
Member
Newcomer

Dude, you’ve obviously never met a lawyer. Lawyers will work all day and night, and go to a nearby hotel so they can get two hours sleep before getting back behind the desk, and then have other lawyers call them slackers.

Bag it and tag it
Member
Bag it and tag it

From the Bob Rennie article: “Another 300-odd transactions were recorded over the long weekend.” Looks like you’re wrong not once, but 300 times.

HAMster
Guest
HAMster

Lawyers can work 36 hours a day.

Boombust
Guest
Boombust

Someone posted an article on today’s blog by a realtor who said sales to foreign buyers have collapsed by about 75%.

So, if all of these foreigners are so RICH and fresh out of the money-laundering-mat, why would a paltry 15% be such a big deal to them?

Shut It Down Already
Guest
Shut It Down Already

Stats like this tend to breakdown when the numbers are small. Sales may have dropped from 4 to 1, which is indeed 75% technically but it’s disingenuous to present it as such. If it was a drop from 4000 to 1000 then it’s be more significant.

Newcomer
Member
Newcomer

If this tax has effect, it will be primarily psychological (like everything else in this market). If people (especially local people, who account for the vast majority of sales) think, “This tax may lower prices,” they may wait a while before making their offer. Whether that will cause prices to fall is anyone’s guess.

Boombust
Guest
Boombust

I absolutely agree with you. The psychology of any bubble is all about second-guessing everyone else…

Boombust
Guest
Boombust

That would be Garth Turner’s blog…

Best place on meth
Guest
Best place on meth

That would be the blog of the prick who referred to the foreign buyer tax as a “head tax”.

Race baiters are incorrigible.

space889
Member
space889

And racists morons are scurring excitedly like cockroaches, while trying to appear all nice and pretty.

Oracle
Guest
Oracle

You denying that Garth is a liar? The facts speak for themselves.

HAMster
Guest
HAMster

This is an old retail marketing trick. Boost the retail price, then put it on “sale” at the regular price. It is illegal to do this in retail sales, but not in real estate.

patriotz
Member

The listing price for RE is simply an invitation to bid, so the seller can set it at any value without any justification.

Chabar
Member
Chabar

Is there a word “illegal” in the Chinese wocabulary?

Best place on meth
Guest
Best place on meth

Probably, but they don’t have a word for ethical, moral or respect.

Ulsterman
Member

I watched the video below of the guy who’s lived in China for 10 years. He likes it and commented on how safe it was. But what really struck me was the absolute lack of ethics he claims is the norm in the society. Food is dangerous, contaminated baby formula, out of date vaccines, no regard for pedestrians on the road etc. I basically said that if a Chinese person can make a quick buck, they’ll do it regardless of how many people get hurt or killed. They think only about their own interests and in the short term. I THOUGHT, WTF is wrong with these people and why do we want this culture’s values dominating the Lower Mainland?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

If this is true, I think it’s the result of having in the recent past lived under a brutal authoritarian regime without any revolution away from it. People stop taking personal responsibility when they have been disempowered in that way.

Chabar
Member
Chabar

Premier Clark and Mayor Roberston are standing up for their rich friends rather than Vancouverites. The 15% tax is pocket change for those buying up Vancouver. This situation can be dealt with effectively and immediately if the federal government recalls parliament to change the immigration laws to stop the sell-off of Canada to Chinese.

patriotz
Member

It has nothing to do with immigration, and everything to do with polcies encouraging foreign buyers, immigrants and native born Canadians alike to use RE as a tax shelter.

Oracle
Guest
Oracle

Immigration needs to be reduced. Otherwise our infrastructure is going to be overwhelmed and we will end up a third world country with everything being user pay.

Permanent resident formation needs to be reduced by 50% per year. That would still be one of the highest rates in the world.

Kim
Guest
Kim

People keep saying 15% is pocket change but this is not pocket change. I don’t invest in real estate but I buy stocks-and I look at valuation closely. If a stock price suddenly moves up 15% with no justification, I won’t buy it, even if you can afford it. If you are a prudent investor, you do not throw away 15% like that. Now, if you are desperate to move money out, then sure, pay the extra 15%. But the psychology of this says that you are being stupid and nobody likes to be played.

Remember, Vancouver is not the only place in the world to buy real estate.