Special offer

Taxation for Foreign Investors in Vancouver?

By
Real Estate Agent with Keller Williams Elite Realty V67142

      A recent article from a Chinese news website has proposed the implementation of a new tax which only applies to non-resident buyers of Vancouver Real Estate.  Many attribute the high prices of Vancouver real estate to foreign buyers who are looking to park their money in Canada, and some local residents of the city think foreigners should have to pay extra.

      How does a tax like this look though, would it be a one-time tax paid upon the purchase of the property such as our already implemented Property Transfer Tax? Or would the tax come in the form of increase property taxes aimed at non-residents owners of Vancouver real estate?

      The United Kingdom has problems with wealthy non-resident buyers who actually end up paying a lower property tax for their homes as the taxation of properties there are more closely related to the number of adults living in a home than the actual market value of the property. So, if a non-resident buys a home simply for speculation, or alternatively only lives there for a handful of days of the year, they’re not contributing much in the way of taxes to support the community in which they sit.

      So the question remains would a tax aimed at foreign buyers, and let’s be honest this tax is aimed mainly at mainland Chinese, level the playing field for local residents? Would increasing property taxes actually deter foreign investors from buying up properties and driving up prices? Or, would the wealthy foreign investors simply absorb the cost and continue to invest anyway? Prices of condos in North Vancouver for example, are hard to come by under $250,000, compared to some areas of British Columbia where such a price would buy you single family home.

      The argument says that, at the very least, by adding taxation for foreign buyers, they would at least contribute more to the local economy. Studies have shown that the majority (over 70%) are the buyers of the luxury real estate market had names associated with traditional mainland China. The article states that if these buyers have no problem paying these prices, what difference would it make to them to pay additional taxes on top of that.

      We do have to consider what consequences such an action would take, an action that the mayor of Vancouver considers “rash” and “may impact investment in the city.” If the plug is pulled on foreign investment all together, I think most will agree that we will see a significant effect on the Vancouver real estate market. However, even a small change in such a large market such as that of North Vancouver alone, could lead to drastic changes.

      By adding an additional cost for foreign buyers, a tariff if you will, we move towards a position of protectionism which favours Canadians. However, it remains unclear what impact this could bring to the market, buyers may benefit in the short term as home prices come down, but what about owners of North Vancouver houses? Does your average homeowner gain anything by tightening up foreign investment?

      Owners of North Vancouver real estate enjoy an appreciation of their investment brought on by rising prices due in large part to foreign investment. What repercussions await our economy if the rug is pulled out from under us when if a sizable portion of buyers (off-shore buyers) stop buying homes?

      It will be very interesting to see what the local and provincial government does in response to these issues, and it remains unclear what repercussions the market will face if implementations are put in place.

 

Comments (0)