Realtors and sellers are concerned that a new tax on foreign homebuyers could cause buyers to back out of sales made in recent months.
On Monday, the province introduced a 15 per cent property transfer tax applying to nearly all residential real estate purchases made by foreign nationals or foreign-controlled corporations.
At a news conference on Monday, the premier said the move was meant to ensure that home ownership is attainable for British Columbia's middle class. Christy Clark said the BC Liberals hope the new tax will reduce the number of foreign buyers in Metro Vancouver.
The day after the tax was announced, the B.C. finance minister provided a clear picture of exactly how much impact foreign buyers have on the region's red-hot market. A total of 6.6 per cent of real estate transactions made in a five week period were by foreign buyers, Minister Mike de Jong said.
Though the transfer tax is meant to help British Columbians, some sellers and their realtors are worried they may lose sales discussed before the tax was announced – or that foreign buyers will back out of deals because of the extra cash required.
"It hasn't been a well thought-out tax," realtor Bryan Velve, from the Velve Group Remax, told CTV News on Tuesday.
"Sellers are fearing that with the only five per cent deposit down...with a 15 per cent tax on top they might just run."
The tax will come into effect on Aug. 2, and only purchases on the treaty lands of the Tsawwassen First Nation will be exempt, the government said.
Deals signed months ago, with a closing date beyond Aug. 2, could face a significant increase in the sale price.
"There has been no grandfathering, so people have entered into contracts in good faith, expecting that this is going to be the cost to purchase the property, and now there is a 15 per cent increase," lawyer Richard Bell said.
In a high-priced market like Vancouver's, buyers could face taxes of hundreds of thousands of dollars.
With the sudden rise in price, there's a risk of contract disputes, which are difficult to mediate - especially when one party lives in another country.
In some cases, sellers may end up paying the majority of the tax, or providing a discount off the agreed-upon sale price just to keep the buyer from balking. In others, buyers are scrambling to push forward closing dates to avoid the tax.
Some realtors are worried their foreign national clients may buy elsewhere.
"They might go to other provinces, they might go to other countries," realtor Ken Chan said.
With a report from CTV Vancouver's Jonathan Glasgow
