Vancouver's foreign buyer tax leads to enormous drop in home sales
Real estate transactions involving foreign nationals decreased by 94 per cent across Metro Vancouver
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The B.C. government’s newly-introduced foreign buyer tax led to a steep drop in both total home sales across Metro Vancouver and the dollar value of residential home sales in the month of August.
In Metro Vancouver, there were 1974 home sales involving foreign nationals in the period from June 10 to August 1. That fell to just 60 from August 2 to August 31. Total dollar value of home sales in Metro Vancouver fell from $14 billion to $6.5 billion.
B.C.’s Ministry of Finance released data that compared two periods of different duration: 53 days between June 10 and August 1, and 30 days between August 2 and 31.
Home sales to foreign buyers dropped 94% between the two periods, when the number of deals in the first period is averaged over a 30-day period.
“I hope all the people who said (foreign buyers) were just 3 to 5 per cent of the market are hanging their heads,” said David Eby, MLA for Vancouver-Point Grey and the Opposition NDP’s critic for housing.
The new tax raised $2.5 million in additional property transfer tax revenue for the province. The data shows that between June 10 and August 1, foreign nationals made up 13.2 per cent of purchasers in Metro Vancouver, 15.5 per cent in Vancouver, 24.7 per cent in Richmond and 24.2 per cent in Burnaby.
“When we look at the data that we have right now, obviously the foreign buyer tax has had a big impact on the foreign nationals,” said Cameron Muir, economist with the BC Real Estate Association.
Muir’s assessment that foreign buyers represented around 5 per cent of the market had influenced the previous BC Liberal position on the issue: that Vancouver’s soaring home prices were a function of supply and demand dynamics, not significant amounts of international money landing in Metro Vancouver’s residential real estate market.
“To set the record straight, it was more than a year ago now that we had compiled the available data and all of that pointed to 5 per cent or so,” Muir said, adding that he still believes a longer data set needs to be collected to know the full effect of the foreign buyer tax. “We recommended that government collect data to better ascertain what was going on in the marketplace.”
The B.C. government’s new 15 per cent tax on home sales in Metro Vancouver involving foreign nationals took effect on August 2. The province took the unexpected action following data collection that began in June, which showed foreign buyers bought over $885 million worth of Metro Vancouver houses and condos in just five weeks.
On July 29, just before the tax took effect, more than $850 million in transactions involving foreign buyers were registered at the B.C. Land Titles office, “equal to more than 55 per cent of all transactions registered in Metro Vancouver on that day, and almost 40 per cent of the total foreign investment in Metro Vancouver residential real estate for the entire period after data collection began and before the additional tax took effect (June 10-Aug. 1, 2016),” according to a government press release.
Eby said the numbers are likely much higher because of techniques like assigning properties to permanent residents or Canadian citizens to avoid paying the tax.
“This is just a small portion of what’s happening,” he said. “We know that in the Trump Tower building, the developer was helping people assign their properties to permanent residents and citizens to avoid the tax.”
The Ministry of Finance is further examining transactions which involved both a Canadian citizen and foreign national (meaning that the 15 per cent tax only applies to the portion of the home bought by the foreign national) to determine whether any of the deals “were structured to avoid the tax.”
The NDP is calling for the adoption of a different taxation proposal: a 2 per cent property tax surcharge, which would apply to homeowners who do not live in their homes or who do not pay income taxes in British Columbia.
Real estate statistics show there has been a sharp drop in the number of single family detached homes sold in August, Muir said, and leading to an overall price decline.
“We saw average price numbers decline in August, but that’s a function of the distribution and the composition of homes sold,” he said.
“Right now this month we’re seeing average prices up from last month, so we might see a bit of a rebounding there.”
Correction: an earlier version of this story stated total home sales and dollar value for Metro Vancouver had dropped 54%, and the number of deals involving foreign buyers had dropped 97%. Those numbers compared two periods of different lengths.