B.C. ‘not amending’ real estate fee
TAX: Premier rules out grandfathering previous deals as critics decry potential ‘chaos’ in housing market
VICTORIA — B.C.’s Liberal government has stood firm despite a barrage of criticism from developers and real estate agents over its foreign buyer tax, admitting Wednesday it expects some real estate deals involving foreigners to collapse.
British Columbians will get a chance to step in and buy the properties foreign citizens choose not to purchase as a result of a new 15-percent foreign buyer tax, said Finance Minister Mike de Jong.
De Jong and Premier Christy Clark offered no apologies Wednesday for the expected negative impact on foreign buyers, nor on British Columbians who have deals to sell to foreigners that may dissolve. As many as 3,000 pre-sale deals (mainly condos) by non-Canadians could be suddenly hit by the new tax and in jeopardy, according to the Urban Development Institute.
“We knew this was going to be dramatic, we knew that this was a point of departure and we knew that the transition in particular was going to attract attention and have shortterm impacts,” said de Jong.
“For a family that has sold their home, sold it to foreign nationals and will have made some other decisions on the basis of that, there is the possibility of complications.
“But I should also be forthright about what is motivating this change and the introduction of this new tax: It is to discourage foreign investment in the residential real estate sector and free up housing for purchasing by British Columbians.”
The Liberal government has been under extraordinary pressure to intervene in the Lower Mainland’s housing market to slow skyrocketing prices that have made purchasing real estate out of reach of many locals.
Clark flatly ruled out changing the tax Wednesday. Some developers and real estate insiders have warned there could be “chaos” in the market because the tax applies to deals and pre-sales signed months or years ago that don’t close until after the tax comes into effect Aug. 2.
“I appreciate this is going to create more work for developers,” Clark told reporters. “But having said that, my job is to protect British Columbians to make sure we put British Columbians first. So we are not going to be exempting anyone; we are not exempting pre-sales, we are not amending the legislation to change pre-sales.”
Clark said her government is on “good legal ground.” People have a week to close their deals before the tax applies, said Clark.
Urban Development Institute president Anne McMullin said the government should allow exemptions for in-progress real estate deals because to do otherwise creates uncertainty in the market, jeopardizes projects and makes banks nervous to provide financing.
“I don’t think it was well thought through,” she said. “It was a political decision, not an economic decision.”
Hani Lammam, executive vice-president of Cressey Development Group, said the tax is going to affect the reputation of B.C. as a safe place to do business — something the finance minister has also admitted.
“The 15-per-cent tax in itself is an extremely steep figure and it will definitely completely eliminate any foreign investment in the residential market,” he said.
Lammam said he understands the intent was to “do something” about the 10 per cent of the Metro Vancouver residential market being bought by non-Canadians, but he disagrees with the method and lack of consultation. That the tax is retroactive and doesn’t exempt contracts already drawn up is “unethical” and “even illegal,” he said.
Clark said discussing the tax before it was introduced “might have created a huge run on the property market.” She expressed little sympathy for foreign buyers who purchased pre-sales years ago, saying they’ve probably already seen the value of their contract rise more than 15 per cent in one year.
But there are also impacts on local residents. Vancouver resident Pat Gardner had a deal with U.S. citizens to sell his downtown condo for $4 million with a closing date at the end of September. But the buyers balked after learning the new foreign buyer’s tax will cost an extra $600,000.
“The first comment was they wanted us to pay the tax and drop the price,” he said.
NDP housing critic David Eby said the NDP will propose amendments to the housing legislation to require the tax be paid by anyone who does not pay taxes on their worldwide income in British Columbia. Rather than being based on citizenship, this would capture any purchaser who does not file their taxes in B.C.