If you live in Vancouver and have perused a newspaper/email/social media platform in the last couple days, we're sure you've been hearing the buzz regarding a new tax the government announced yesterday - it's the hot topic that everyone is talking about. Overwhelmed by all the frenzy surrounding real estate topics in the news these days? The Casano Group gets it - so we've decided to write a blog to break it all down for you.
Carly & Renee
In an effort to address the issue of rising home prices in the Lower Mainland, Christie Clark's government has decided to crack down on foreign ownership. Just announced yesterday, the BC Government has introduced a new 15% tax on all foreign buyers of residential real estate in British Columbia, effective August 2nd, 2016. This tax will be applicable to all residential real estate transactions that are registered in the Lands Title Office after August 2nd, regardless of when the deal was completed - it does not affect commercial property. This additional 15% Property Transfer Tax will apply to all foreign entities including, foreign nationals, foreign corporations, taxable trustees. Foreign nationals are defined as "transferees who are not Canadian citizens or permanent residents, including stateless persons" by the Ministry of Finance.
According to data collected by the Provincial Government, foreign nationals purchased more than $1 billion in BC property in the 5-week period between June 10th and July 14th, 2016, with 86% of that being in the Lower Mainland. With this new tax, that same volume of sales would provide the province $150 million in tax revenue. The government hopes this initiative will help to ease some of the upward pressure on home prices in BC, but recognizes that foreign investment is only one factor that has been driving up the cost of BC real estate. To put this number into perspective, a foreign buyer looking to purchase a $2 million home in Vancouver will now be subjected to an additional tax of $300,000 on the purchase. For those buyers that have already entered into a firm and binding contract of purchase and sale that completes after August 2nd, this tax will come as quite the shock. Speak to your Realtor & lawyer should you be in this situation as they may be able to negotiate a change in completion date for your transaction.
Another notable announcement yesterday was the amendment of the Vancouver Charter to provide the City of Vancouver legislative authority to implement taxes on vacant homes. The city will be responsible for "designing the framework of the vacancy tax, including details like the tax rate, when it will apply and any necessary exemptions." This is in response to the staggeringly low rental vacancy rate in Vancouver of 0.6%.
It will be interesting to see how these two initiatives affect the Vancouver real estate market in the coming weeks and months, and if they discourage foreign investment or increase the rental vacancy rate. The goal of these changes is to make BC real estate affordable an accessible for middle class Canadians working and living here, we will be watching closely to see what happens.