BC is bringing in a 15% tax on property sales to foreign nationals and this comes to effect August 2nd.. What will this mean to Vancouver’s red-hot property market?
First of all, foreign buyers account for a small part of the market, around 5% - 10% (this is the consensus from several web articles). So that means this tax would only affect 5% - 10% of the buyers who are foreign investors. There are still 90% of local buyers who continue to purchase properties that are at lower values and support the real estate market.
In my opinion, I feel that this tax would only affect the overly expensive detached homes rather than the average priced condos. And here is my reason why, even if detached home market gets adjusted by 15% to account for this newly implemented property tax, detached homes would still be out of the budget of an average income household to afford. This with combination of interest rate remaining low, the average housing market might still sustain.
Detached homes are often closed way over asking prices anyways. So 15% is the very minimal for a foreign buyer, heck we pay 15% tips at a restaurant. An extra $300000 on a 2 million home should be a norm for them (Duties on cars are nearly double in North American compare to other countries).
Although, there are articles reporting the lowest number of sales in June 2016, since June 2013 for detached home in the GVA, it would be helpful to show the number of sales in addition to the percentages to give more perspective. It is not uncommon for home sales to lag during the summer; stock market, for instance, has low trading volume during summer. I think one contributing factor might be that foreign investors were purchasing outside GVA such as Surrey due to restricted mortgage rule from Canada. Foreign investors might have difficulty in proving the source of their down payment. With lack of prove of where the source comes from, Banks are more stringent on their lending. Some investors might be looking for properties in Surrey for less and when they DO sell the house in Surrey, they can prove to the bank that down payment came from the proceeds and can use these proceeds to buy in to Vancouver once again.
NONETHELESS, I think the policy is a good first step it’s great that the government is taking action to do something so quickly.
Read more at Globe and Mail: http://www.theglobeandmail.com/news/british-columbia/bc-to-target-foreig...