In August of last year, the Government of British Columbia implemented a 15% property transfer tax on foreign buyers solely in the Greater Vancouver area. The tax was implemented to cool the Vancouver housing market, reduce speculative buying, and to de-incentivize foreign buyers from purchasing homes for the sake of investing and leaving them vacant.
Housing prices in Vancouver had been rising quickly for years and increased media coverage of ‘empty mansions’ owned by foreigners for investment purposes led to the BC government deciding to act.
The effect of the tax was real and raw. Royal LePage, a major real estate brokerage, expects prices in Vancouver to fall by 8.5% in 2017 after overall home sales fell by 40% since the tax was implemented. In Victoria, where no foreign buyer tax was implemented, prices continue to rise and sales are staying strong.
On March 9th, Ontario Finance Minister Charles Sousa said that the provincial government was “open” to the idea of imposing a BC style tax in the Greater Toronto Area. Sousa voiced concern about ongoing bidding wars, high housing prices, and families being priced out of the market. In response, Toronto Mayor John Tory said he needed to see “more data” before committing support or opposition to the tax.
What the experts say
Many real estate groups are firmly opposed to the province taxing foreign buyers. The Ontario Real Estate Association and the Toronto Real Estate Board both say that the number of foreign buyers is a tiny sliver of less than 5% of the overall number of people trying to buy a house in Toronto, and that a tax would not cool high prices or do enough to decrease demand. The number of foreign buyers in the Vancouver market was at least 15% before the tax was implemented, with many realtors suggesting the actual number was much higher.
Some of the country’s biggest banks, however, are open to the tax. RBC CEO Dave McKay has said that “we may need actions that are similar to Vancouver.” Also, the National Bank of Canada has publicly stated that it believes a broad “re-think” is needed for the market and voiced support for looking into the tax.
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