In an analysis published by the Financial Post
, James West of the Midas Letter
noted that the 15 per cent tax might instead only induce a home price increase of similar magnitude.
“That’s because, for the driving force behind the supercharged environment for home in Vancouver — wealthy Chinese billionaires — the 15 per cent tax barely qualifies as a rounding error. And with the status-obsessed Chinese, that new tax has just made Vancouver one of the most exclusive addresses in the world,” West wrote.
And while the ultimate effects of the tax have of course yet to manifest, Vancouver might serve as a test case for other Canadian markets, which for the most part have played host to wealthy foreign nationals over the past decade due to less stringent immigration regulations.
“If the housing market were to demonstrate any weakness, the Canadian government is in the enviable position of being able to tighten or ease policy to regulate the flow of, and more importantly, the net worth of immigrants into Canada,” the analyst said.
“All eyes in Toronto will be on Vancouver in the weeks ahead to see exactly what effect the new tax ultimately exerts,” West added. “Vancouver is also planning a tax on any empty real estate to curb the practice of buying condos in order to qualify for permanent resident status.”
The new tax, which took effect last Tuesday (August 2), engendered much controversy, and Toronto industry professionals have voiced fears that the city’s homes—especially those in the luxury segment—would become increasingly out of reach of domestic buyers as a result.
“Where are those foreign investors going to go? They're not going to want to pay that 15 per cent, so they're going to now dump it into the Toronto real estate market, which is already hot,” Toronto-based real estate agent Derek Ladouceur said earlier this week.
Canadian professionals’ statements reflect Chinese fears over new tax
Vancouver agent under investigation for advocating tax evasion
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The new tax on foreign buyers of residential properties in British Columbia was ostensibly meant to cool down the overburdened Vancouver market, but a long-time market observer noted that the levy will precisely have the opposite effect—at least in the near future.