For­eign-buyer tax con­jures pos­si­bil­i­ties

The Daily Courier - - OPINION - LES LEYNE

The for­eign-buyer tax con­tin­ues to fas­ci­nate. Par­tic­u­larly since a new set of data sug­gests its im­pact has worn off, and it isn’t work­ing as well in metro Van­cou­ver as first thought.

That raises the prospect — dis­tant at this point — of an in­crease in the tax, which would be a novel propo­si­tion.

Gov­ern­ments tra­di­tion­ally go into idle mode dur­ing cam­paigns. They rarely do any­thing other than main­tain the sta­tus quo and re­act to emer­gen­cies.

Div­ing back into the af­ford­abil­ity cri­sis with a dra­matic move would be well out­side the care­taker norm.

Plus, when was the last time any­one im­posed a tax in­crease in the mid­dle of an elec­tion cam­paign?

Still, a few things tease the imag­i­na­tion. One is that it could be done at the stroke of a pen. The tax was leg­is­lated into be­ing last sum­mer, but the rate can be set by a cab­i­net or­der.

And the B.C. Lib­er­als made clear the 15 per cent rate they set at the out­set was not cast in stone and could be ad­justed quickly five points either way, de­pend­ing on cir­cum­stances.

An­other is that in­creas­ing the tax is al­ready promised by some of the gov­ern­ment’s op­po­nents. The B.C. Greens want to dou­ble it.

Which leads to the third teaser — the tax is ap­par­ently a pop­u­lar item with the pub­lic. A poll this week found sup­port for the tax in the 40 per cent range, which for a tax is ex­tra­or­di­nary.

Hik­ing it would amount to giv­ing peo­ple what they seem to want, which is what cam­paign­ing is all about.

An ac­tual move is un­likely. But a prom­ise from the Lib­er­als to make a move if re-elected is slightly more within the realm of pos­si­bil­ity.

The new data are in a re­port from Royal LePage on Van­cou­ver house prices that dis­cusses the chances of a per­ceived “whiplash.” It’s pos­si­ble that six months of pent-up de­mand will be un­leashed, send­ing prices sharply up­ward again.

The pro­jec­tion is based on data show­ing prices and sales are ris­ing again, af­ter a down­turn last year.

The mar­ket cor­rec­tion that was un­der­way last year and at least partly at­trib­uted to the for­eign-buyer tax might be short-lived, said the re­port. It was sharply crit­i­cal of the tax, say­ing it was heavy-handed.

Although the per­ceived tar­get was Chi­nese in­vestors, it af­fected mostly Cana­di­ans, said the com­pany. But that re­ac­tion is about what you’d ex­pect from a real-es­tate com­pany re­act­ing to any­thing that cools the mar­ket.

It was an au­da­cious move the Lib­er­als made last sum­mer, when they re­called the leg­is­la­ture and brought in a pack­age of real-es­tate mea­sures, in­clud­ing a re­gion-spe­cific tax im­posed with just one week’s no­tice.

It ap­plied only in metro Van­cou­ver, and on a $2-mil­lion home it jacked the prop­erty trans­fer tax from $38,000 to $338,000 for for­eign buy­ers.

One of the big­ger ques­tion marks was whether it would just drive for­eign money to other B.C. mar­kets — such as Vic­to­ria — and pro­pel prices up. That doesn’t seem to have hap­pened.

The unique tax sharply cur­tailed pur­chases of metro Van­cou­ver real es­tate by for­eign­ers. They were do­ing 13 per cent of deals the month be­fore the tax. Last month, they ac­counted for 3.4 per cent. It also left the im­pres­sion prices dropped slightly as a re­sult of the tax — at least for a while.

The NDP had ag­i­tated over the pre­vi­ous year or more about the im­pact of for­eign own­er­ship on hous­ing prices, but was more fo­cused on curb­ing spec­u­la­tion by way of a va­cancy tax, which the Lib­er­als also pro­vided for in the July pack­age.

The NDP plat­form now tar­gets “cheaters” who are dodg­ing the prop­erty-trans­fer tax, prom­ises a two per cent “ab­sen­tee spec­u­la­tors’ tax” and says the lim­ited mea­sures the Lib­er­als took ended up hurt­ing per­ma­nent res­i­dents.

The NDP is silent on the fu­ture of the for­eign-buyer tax.

B.C. Greens like it so much they want to dou­ble it — to 30 per cent, and im­pose it all over B.C.

They also want a slid­ing-scale prop­er­ty­trans­fer tax of up to 12 per cent, a “spec­u­la­tion trans­fer tax” and in­clu­sion of prin­ci­pal­res­i­dence sales in a life­time cap­i­tal-gains tax.

Les Leyne cov­ers the leg­is­la­ture for the Vic­to­ria Times Colonist. Email: lleyne@times­colonist.com.

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