As housing prices rise, foreign-buyer tax is not effective
B.C. real estate prices are on the rise and demand continues to outstrip supply, which the NDP says shows the foreign-buyer tax that was announced almost a year ago wasn’t enough to cool the market.
On Tuesday, the B.C. Real Estate Association reported that in May, residential sales in B.C. were down almost eight per cent from last year, but the average sale price was $752,536, up 4.2 per cent.
The trend in Metro Vancouver mirrors that of the rest of the province: sales are down, but the composite benchmark price for detached homes, townhouses and apartments is $967,500, up 8.8 per cent over last year.
“I wouldn’t have expected any substantial change in the real estate market in Metro Vancouver because none of the underlying issues really have been dealt with,” said David Eby, Vancouver-Point Grey MLA and spokesman for the B.C. NDP on housing.
“We have a chronic shortage of affordable housing being constructed in Metro Vancouver and we haven’t addressed issues of toxic demand in our housing market — especially speculation.”
Cameron Muir, chief economist with the B.C. Real Estate Association, said the market was already in decline when the foreign-buyer tax took effect last August, and there was a slightly sharper drop after it was instituted. He said the tax was likely responsible for part of that decline, causing foreign buyers to pull out and eroding the confidence of other buyers in the short term.
Eby summed it up by saying that the foreign-buyer tax made buyers and sellers wait to see the impact. When it became apparent that there was no real effect, people re-entered the market.
“What we really see now is that those efforts to tamp down overall housing demands appear to be quite temporary in nature and that markets today are once again marching higher,” Muir said. “The foreign-buyer tax is not a panacea for housing affordability.”
B.C. Green party Leader Andrew Weaver agreed. “There is no single approach, that is the problem. The B.C. Liberals let this get away from them and then they introduced a single measure. You have to have a suite of policies,” he said.
The real concern, Muir said, is the lack of supply.
The NDP has promised to build 114,000 affordable rental units over the next 10 years to relieve some of the pressure. Eby recognized that it’ll take time for supply to catch up to demand, but, in the meantime, the NDP has proposed other measures.
The NDP would implement a twoper-cent speculation tax for foreign buyers who leave their properties empty. Revenue would go into a B.C. Housing Affordability Fund. Eby said there are no plans at this time to increase the foreign-buyer tax to 30 per cent, which is something the Greens proposed.
The NDP has also promised to close loopholes that allow for flipping of presale condos and establish a multi-agency task force to fight tax fraud and money laundering in the real-estate market.
Eby said there are other “real sleepers” in the NDP platform that could have a significant impact on the market, such as a requirement to disclose the actual owner of a home or company in title documents.