Chi­nese buy­ers sour on Van­cou­ver tax

China Daily (Canada) - - FRONT PAGE - By NA LI and LOUSIA YOU in Toronto

Bri­tish Co­lum­bia is try­ing to cool down Van­cou­ver’s siz­zling real es­tate mar­ket by giv­ing out­siders a strong in­cen­tive to keep shop­ping.

“We can un­der­stand the govern­ment pro­tect­ing civic in­ter­ests, but it should be done in fair and rea­son­able ways,” said a Chi­nese buyer who made a real es­tate deal in Van­cou­ver in May that was set to close in Septem­ber.

Now he sud­denly has to pay the ad­di­tional new 15 per­cent prop­erty trans­fer tax (PTT).

The new PTT is­sued by the pro­vin­cial govern­ment of Bri­tish Co­lum­bia on for­eign buy­ers of homes in Van­cou­ver took ef­fect on Aug 2.

The tax adds an ex­tra 15 per­cent payable to the pro­vin­cial govern­ment on pur­chases made by for­eign cor­po­ra­tions and in­di­vid­u­als of res­i­den­tial prop­er­ties in Van­cou­ver.

This is in ad­di­tion to BC’s ex­ist­ing gen­eral prop­erty trans­fer tax of 1 per­cent on the first C$200,000 of a home’s value and 2 per­cent on the re­main­ing value up to $2 mil­lion.

“We’re not sure if this kind of govern­ment de­ci­sion-mak­ing body will im­pose more poli­cies with no bot­tom line in the fu­ture,” said the buyer, who wished to re­main anony­mous, “and so we will stop, give it up”.

The BC govern­ment now re­quires in­di­vid­u­als who are not cit­i­zens or per­ma­nent res­i­dents of Canada to file an ad­di­tional PTT re­turn at the time the trans­fer is reg­is­tered. Those who do not pay and try to evade face fines of $100,000 for in­di­vid­u­als, $200,000 for cor­po­ra­tions and up to two years in pri­son.

There has long been spec­u­la­tion on the im­pact for­eign in­vestors have been hav­ing on the sky­rock­et­ing prices of Canada’s real es­tate, par­tic­u­larly in cities such as Toronto and Mon­treal, but Van­cou­ver has been at the epi­cen­tre of the scru­tiny. A new study found that 91 per­cent of de­tached homes in Van­cou­ver are now over the $1 mil­lion mark.

Lo­cal res­i­dents claim that the re­gion’s houses have be­come the most un­af­ford­able in Canada be­cause of for­eign buy­ers driv­ing up prices. The ex­tra 15 per­cent tax is an at­tempt to slow that for­eign spec­u­la­tion.

Ac­cord­ing to BC Premier Christy Clark, there is ev­i­dence sug­gest­ing that wealthy for­eign buy­ers have raised prices.

Yet, ac­cord­ing to the govern­ment’s own data, for­eign home buy­ers ac­count for less than 3 per­cent of the to­tal trans­ac­tions in the Van­cou­ver re­gion.

The Asia Real Es­tate As­so­ci­a­tion of Amer­ica (AREAA) says that of the 10,148 real es­tate trans­ac­tions be­tween June 10 and 29 in BC, half were in the Lower Main­land. Just 337 of those sales, or 3.3 per­cent of the to­tal, in­volved for­eign na­tion­als, mean­ing 97 per­cent in­volved ei­ther Cana­dian cit­i­zens or per­ma­nent res­i­dents.

The bulk of the for­eign buy­ers were from China — 258, or 2.5 of the to­tal. The sec­ond-largest source of for­eign in­vest­ment was the US, which con­sti­tuted 0.23 per­cent of sales to for­eign na­tion­als, ac­cord­ing to AREAA.

“It was un­jus­ti­fied for peo­ple to blame buy­ers, es­pe­cially Chi­nese buy­ers,” said Liu Fei, Chi­nese Con­sul Gen­eral in Van­cou­ver. “The sky­rock­et­ing house prices and af­ford­abil­ity cri­sis are due to a lack of reg­u­la­tion in the boom­ing real es­tate mar­ket.”

Com­ment­ing on the new BC tax, Yang Yun­dong, coun­sel­lor and spokesman at the Chi­nese em­bassy in Ot­tawa, said, “The Chi­nese govern­ment al­ways en­cour­ages Chi­nese in­vestors in Canada to abide by rel­e­vant lo­cal laws and reg­u­la­tions.”

Some in­dus­try in­sid­ers are less than pleased. “A new real es­tate tax, with just eight days’ no­tice and no con­sul­ta­tion with the pro­fes­sion­als who serve home-buy­ers and sell­ers ev­ery day need­lessly in­jects un­cer­tainty into the mar­ket,” said Dan Mor­ri­son, pres­i­dent of the Real Es­tate Board of Greater Van­cou­ver, who called on the govern­ment to ex­empt trans­ac­tions that were al­ready in the process of clos­ing.

It was un­jus­ti­fied for peo­ple to blame buy­ers, es­pe­cially Chi­nese buy­ers.”

No ex­emp­tions were made as the tax went into ef­fect over the long BC Day week­end. “While it’s the govern­ment’s pre­rog­a­tive to im­ple­ment taxes, peo­ple de­serve to be treated fairly,” Mor­ri­son said. “They have a right to un­der­stand the cost they’re ex­pected to pay when they en­ter into a le­gal agree­ment.”

Alex Liu, a real­tor with Sut­ton Group-Seafair Realty in Van­cou­ver, said, “It is im­por­tant to note that although the num­bers of sales have de­creased, the value of these homes has not. The ac­tiv­ity level is slow­ing, but not prices.”

“The mar­ket will slow down for now, but it’s just short term,” he said. “Sup­ply and de­mand re­main the same and prices and the mar­ket will pick up in the fu­ture, for sure.”

Liu pointed out that some buy­ers who are not off­shore in­vestors are hit by the PTT. “Lots of these for­eign buy­ers have some con­nec­tion to Van­cou­ver,” he said. “For ex­am­ple, in­ter­na­tional stu­dents and new grad­u­ates who live in Canada on work visas; they live here in Van­cou­ver and pay taxes and yet they still have to pay this 15 per­cent.”

Some po­ten­tial Chi­nese buy­ers told China Daily that es­pe­cially now with the new PTT, they are wait­ing more than ever for the hous­ing mar­ket to cool down be­fore mak­ing a move.

“This is a se­ri­ous blow to our con­fi­dence in Canada’s in­vest­ment tourism and we feel that the govern­ment has lost some of its in­tegrity,” said Michael Ma, a Chi­nese fa­ther who had planned to buy a con­do­minium for his son in Van­cou­ver. “We will of course con­sider other ar­eas — not in Canada, I mean an­other coun­try.”

“I don’t think Chi­nese buy­ers are en­tirely re­spon­si­ble for Van­cou­ver’s house price in­creases, although in­ter­est from over­seas buy­ers log­i­cally pushes up lo­cal prices,” said Judy Lee, a Toron­to­based real­tor with Re­Max.

“If for­eign­ers start to worry about taxes hurt­ing their re­turn on in­vest­ment in Canada, they will be more likely to spend in other coun­tries,” said Jeremy Kron­ick, se­nior pol­icy an­a­lyst at the C.D. Howe In­sti­tute.

“The new pol­icy will have a strong im­pact on houses over $4 mil­lion, which are al­ways favoured by off­shore buy­ers,” said Yongci Lyu, a real­tor in Van­cou­ver.

Some ex­perts warn that for­eign buy­ers might try to hide their iden­ti­ties by get­ting lo­cal res­i­dents to buy prop­er­ties on their be­half.

“Since the new tax pol­icy has just come into ef­fect, the best way to mea­sure its im­pact is to look at both the num­ber of sales and value of each sale through Septem­ber and Oc­to­ber,” said Ben­jamin Peng, a Sut­ton real­tor who has ex­ten­sive ex­pe­ri­ence with over­seas clients.

Ob­servers won­der if On­tario will fol­low BC’s lead and im­ple­ment a new real es­tate tax.

“If the buy­ers do not want to pay that 15 per­cent, they’re go­ing to now dump it into the Toronto real es­tate mar­ket, which is al­ready hot,” said Derek Ladouceur, a Toronto real es­tate agent.

On­tario fi­nance min­is­ter Charles Sousa said he will be look­ing very closely at BC’s tax aimed at for­eign home buy­ers as he looks for ways to ad­dress erod­ing af­ford­abil­ity in Toronto’s hous­ing mar­ket.

“I wel­come what BC is put­ting for­ward,” he said. “But, we’ve got to be cog­nizant of the im­pacts of those de­ci­sions.”

Sousa said that any poli­cies in­tro­duced to cool down Toronto’s hot real es­tate sec­tor could af­fect other parts of the prov­ince that aren’t see­ing the same prob­lem.

Con­tact the writer at: re­nali@chi­nadai­lyusa.com

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.