B.C. introduces 15 per cent property transfer tax for foreign buyers
The B.C. government is implementing a new tax it hopes will dissuade foreign buyers from scooping up property in Metro Vancouver’s red-hot housing market.
The 15 per cent property transfer tax will apply to nearly all residential real estate purchases in the region from foreign nationals or foreign-controlled corporations, the province announced Monday.
“We are taking measures to ensure that home ownership remains in reach of the middle class, and that we continue to put British Columbians first,” Premier Christy Clark told reporters.
“There’s more to do and you’ll see more changes coming as the months go on.”
The tax will come into effect on Aug. 2, and only purchases on the treaty lands of the Tsawwassen First Nation will be exempt, according to the government.
For a home valued at $2 million, the tax will amount to $300,000. That’s about eight times as much as buyers pay under the existing property transfer tax, which is calculated at one per cent of the first $200,000 of a home purchase, two per cent on any amount under $2 million, and three per cent on the remainder.
On a $2 million property, that comes to about $38,000.
Clark said the government hopes the new tax will reduce the number of foreign buyers in Metro Vancouver, but if it doesn’t the government will have a new revenue stream to help address affordability problems.
“If foreign buyers are still coming into our market, it means we will create a fund out of that additional revenue that will be 100 per cent dedicated to supporting home affordability for British Columbians,” she said.
According to data the provincial government started collecting this summer, foreign nationals invested more than $1 billion in B.C. property from June 10 to July 14, 86 per cent of which was in the Lower Mainland.
Finance Minister Mike de Jong said the government is still focused tackling affordability issues by increasing the supply of housing, but that the tax could help by diminishing outside demand.
The government’s legislation will also allow it to increase the tax to 20 per cent or decrease it to 10 per cent as it sees fit.
“As we track the impact this has on the market, the government has that level of discretionary authority to adjust the amount,” de Jong said.
Monday’s announcement drew criticism from the opposition NDP, which suggested that determined individuals will be able to find a way around paying the tax, as it relies on people self-identifying as foreign nationals during purchases.
“Sophisticated investors, those who are laundering money through our market, will be able to get by that pretty easily,” leader John Horgan said.
The tax also falls short by focusing on foreign nationals exclusively, Horgan added, arguing much of the investment in Metro Vancouver real estate is being funneled through people who already live in Canada.
“What we’ve been advocating for… is using the Income Tax Act to make sure the people who are purchasing homes are participating in the economy. Clearly the Liberals don’t want to do that because their backers are quite happy with the status quo,” Horgan said.
The Real Estate Board of Greater Vancouver also spoke out against the measure, raising concerns that introducing such a steep tax with only eight days’ notice will create uncertainty in the market.
“Government has had a long time to take action on the affordability issue, yet they decide to bring this new tax in over a long weekend, with no notice, and no time to prepare,” board president Dan Morrison said in a statement.
Morrison called on the government to allow an exemption for all real estate transactions that are already in the process of closing.
Apart from the new tax, the province introduced amendments Monday to end self-regulation in the real estate industry and give the City of Vancouver the power to administer a tax on vacant homes.
With files from CTV Vancouver’s Jon Woodward