Pulling down prices

Vancouver introduced a tax on homes bought by foreigners empty In the last year property prices fell are almost on par, last year, the Canadian city took inspiration from Australia by clamping down on foreign buyers purchasing existing homes in the seaside city.

Like Australian cities, Vancouver property is in hot demand from international investors, particularly the growing Chinese middle classes.

But unlike Australia, Canada has no restriction on foreigners buying real estate — and in a country where property taxes are very low, that was driving prices skywards in Vancouver, which frequently battles it out with Melbourne for the title of the World’s Most Liveable City.

While property taxes in Canada are low, income taxes are high.

Many homes bought by foreign investors are left vacant, to avoid paying the income tax rental money attracts. The impact was twofold. It drove prices out of reach for local buyers and, with so many homes sitting vacant, greatly contributed to the city’s crippling rental crisis.

Just seven homes in every thousand are available for rent in Vancouver, making competition for homes ultra-competitive.

So, in August last year, Vancouver’s provincial authority, British Columbia, moved.

They introduced a 15 per cent tax on homes bought by foreign investors, which added about $150,000 to the cost of a million dollar home. — Bloomberg