Foreigners bought 9.7 per cent of homes recently sold in Metro Vancouver, and a new tax they’ll face will have an immediate impact on the Semiahmoo Peninsula, according to local brokerage firms.
“I just met with a realtor this morning – he lost three buyers and one asked for a referral to a Toronto realtor because he’s going to take his $4 million there,” said Philip DuMoulin, senior vice-president of sales for Sotheby’s International Realty in South Surrey.
The province released new real-estate transaction data Tuesday, a day after announcing it would impose a 15 per cent transfer tax on residential real estate purchases by foreign nationals in Metro Vancouver.
DuMoulin, whose firm deals in high-end properties, said many realtors are now scrambling to ensure their buyers complete purchases before the tax comes into effect Aug. 2. That has led to at least one case where a seller is demanding more money to close early. Lawyers are also charging rush fees, DuMoulin said.
Others impacted include those who’ve already bought and are now listing – only to find the pool of buyers isn’t as deep. Families will also be impacted, said DuMoulin, noting a downsizing couple may no longer get the money they were expecting, and in turn affect plans to provide money to their children to break into the market.
“Are there a lot of (international) buyers out there? Yes. Are they going to take their money elsewhere? I would have to believe absolutely, and watch everybody scream if potentially prices were to de-accelerate,” he said.
Foreign buyers are a specialty of New Coast Realty, according to its Chinese-and-English flyers that boast having “thousands of international buyers and investor clients.”
Dave Erickson, managing broker at the agency’s South Surrey office, said only “a small percentage” of his agency’s buyers are Chinese nationals, but acknowledged the tax will have an impact.
“Would you pay 15 per cent over-market for a property? It’s really hard to say (but) it will definitely slow the market,” he said. “Maybe we’ll get back to normal. The market has been extremely excited for two years.”
A traditional market, where buyers aren’t rushed to make decisions, is a good thing said Erickson. So is the tax, he said, except that it doesn’t consider deals in progress, requiring a buyer of a $5-million home to ante up an additional – and unexpected – $750,000 for closing after Aug. 2.
“My concern would be some of the new developments in the city where there may be a number of suites that – they’re not going to close,” said Erickson.
Finance Minister Mike de Jong expects the tax will reduce the pace of foreign investment now happening in Metro, and acknowledged it could result in foreign buyers purchasing more property in other B.C. regions.
The impact of the tax is yet to be seen, de Jong said, adding he expects it to generate “some” rather than “a lot” of extra revenue, which could support affordable housing and rental-assistance initiatives.
De Jong defended the government’s choice of a higher property transfer tax at the time of sale rather than alternate proposals of an elevated annual property tax from which Canadian citizens or working residents could be exempted.
“If the argument is that a two per cent increase in property tax levied a year from now is more effective than a 15 per cent increase in tax that will take effect next week to reduce international participation in the residential real estate market, I just don’t buy that,” de Jong said.
“It’s far more reliable than anything else we have.”
The new tax doesn’t apply to non-citizens who have permanent residency status.
The province has been criticized for leaving the door open to deals paid for by foreigners but run through their relatives already in Canada.
The province will ask Canadian citizens or permanent residents to verify their status by providing social insurance numbers, which foreign nationals wouldn’t be able to supply. Audits are also promised, along with penalties for those who try to dodge the tax.
But de Jong said he opposes targeting new real estate taxes at those who own expensive homes but have suspiciously low incomes and pay little to no tax.
“There are a lot of seniors who are cash-poor but bought their homes 40 years ago.”
He reiterated his position that extra taxes are justified on people who don’t pay tax here and merely use B.C. real estate as a place to invest foreign-sourced money.
“If you don’t get at that international money, you’re not solving the problem,” he said.
–with files from Jeff Nagel