Targets Foreign Buyers with 15% Tax.
Vancouver, British Columbia, has been in a phenomenal housing bubble. The benchmark price for homes in Metro Vancouver soared 32% in June year-over-year, according to the Real Estate Board of Greater Vancouver! Other price gauges come up with different results, depending on how they’re structured, including the chart below. But all of them point at an insane situation. For just how far this can go, read, Teardowns and Shadow-Flipping: Living Inside the Insane Vancouver Housing Bubble.
But now the government of the Province of British Columbia is doing something about it – trying to at least. The Globe & Mail:
The British Columbia government is in the midst of a wide-ranging overhaul of how the housing market is regulated and taxed, amid growing concerns that foreign ownership, rampant speculation and unscrupulous real estate agents are fueling an affordability crisis.
During the past several months, the province has announced an end to self-regulation, largely in response to a series of Globe and Mail investigations into questionable practices within the industry; a tax on vacant homes in the City of Vancouver; and a 15 per cent tax on home purchases involving foreigners.
Here’s Christine Hughes, Chief Investment Strategist, OtterWood Capital:
The surge in Canadian house prices has been well documented, notably in the white hot markets of Toronto and Vancouver. In June prices rose 2.3% nationwide led by Vancouver which exceeded 2% for the fifth straight month in a row. The chart below shows the increasing divergence between markets like Toronto and Vancouver and the rest of Canada.
The debate over the source of Vancouver’s surging house price has focused primarily on purchases by wealthy foreign buyers, see here. To gain support for this idea the BC government tracked the nationality of residential housing purchasers in the province between June 10 and July 14. The early data showed foreigners accounted for $1 billion in purchases with 5% foreign buyers in the Vancouver region.
To slow foreign demand the BC provincial government has added a 15% tax on houses purchased by foreigners. This translates into an extra $300,000 tax for a foreigner buying a $2 million house. The City of Vancouver is also planning on adding a tax on empty homes after a study revealed that there were roughly 10,800 empty homes in the city as of 2014.
But unlike stocks, a housing bubble, even Housing Bubble 2 in the US, can only go so far. Read… Why this Won’t Work out: Rampant Rent Inflation Collides with Stagnant Incomes