Description

In June 2016, the B.C. government announced a 15 percent property transfer tax on foreign nationals–defined as a person who is not a Canadian citizen or permanent resident of Canada–buying real estate in Metro Vancouver. The new tax took effect August 2, 2016.

Potential Significance

The 15-percent tax was introduced to dampen prices in Vancouver’s hot real estate market. The tax on the purchase of a home selling for $2 million to a foreign national amounts to $300,000. The average price for detached properties peaked in January 2016 at $1.83-million. Housing sales set a record high in March 2016. By November, the average price had decreased to $1.61-million and bidding above asking price was rare.

Background

  • All B.C. residents currently pay a one percent tax on the first $200,000 of their purchase, two per cent on the remaining value up to $2 million and three per cent on any portion above that. The foreign buyers tax would be in addition to the current property transfer tax.
  • The finance ministry initially estimated revenue of $165 million annually from the tax. The BC government announced that revenue from the additional tax would be used to fund housing, rental and support programs. But by November, officials were saying the new tax was likely to generate much less money than anticipated.
  • Recent government housing data indicate foreign nationals spent more than $1 billion on B.C. property between June 10, 2016 and July 14, with 86 per cent on purchases in the Lower Mainland area.
  • The government reported that 13 per cent of residential sales went to foreigners in July 2016. In September, one month after the tax came into effect, only 1.8 per cent of buyers were foreigners. The following month, the rate increased to 3 per cent.
  • The foreign buyers tax legislation allows the government to adjust the rate or apply it to new regions at any time via regulation.

Sources