The domino effect of B.C.'s new foreign buyer's tax

The B.C. government’s announcement on Monday (July 25) of a new 15 per cent foreign buyer’s tax will impact not only overseas purchasers of residential real estate, but Canadian citizens as well.
“The provincial government really should have looked downstream to see all the different groups that would be impacted by this retroactive tax. I’m just not sure this was thoroughly thought out,” Royal LePage West agent Adil Dinani told MoneySense.
“The real concern is the implementation of this tax,” Dinani stated. “Usually there’s a policy effective date, like with the last mortgage amortization or down payment changes, but this time there was no consultation. Just an imposed policy.”
The levy will be applied to all B.C. homes sold during and after August 2, 2016.
Mere days after the announcement, the effects of the steep tax have already made themselves felt among agents in Vancouver, where the benchmark price has breached the $1.5-million mark in June. Foreign nationals have purchased over $1 billion worth of properties in B.C. between June 10 and July 14 this year.
“Being on the frontline, we’ve already seen fall-out,” Dinani said on Tuesday (July 26). “I’ve had calls in the last 24 hours from agents representing foreign buyers who are backing out of deals because of this new tax.”
Toronto Royal LePage agent Cailey Heaps Estrin agreed with this grim view, adding that the imposition of the tax will get in the way of what she called an “open and fair market.”
“I just don’t see how it will help, considering how much our nation’s housing market helps the economy,” Estrin said. “There’s not a financial market in the world that doesn’t slow down. Eventually the Vancouver and Toronto market will slow down, so I’m not sure if this tax will create the desired effect.”
Real Estate Board of Greater Vancouver president Dan Morrison argued that the government acted hastily, without even considering the domino effect downstream.
“Implementing a new real estate tax with just eight days’ notice and no consultation with the professionals who serve home buyers and sellers needlessly injects uncertainty into the market,” Morrison said.

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  • by MFenn 2016-07-29 11:26:00 AM

    It's Walter Gordon-style bungling all over again. We need to be clear that measures to dissuade "foreign bogeypeople"'s investor money simply do not make economic sense. Such measures are redolent of the hapless Walter Gordon in the '60s. Michael Bliss writes that Gordon, a nice man and truly disastrous at the financial helm, "bypassed his senior officials to bring in outside consultants (most notably a thirty per cent takeover tax on sales of Canadian companies to outsiders), disregarded clear warnings that his schemes were unworkable, learned from an enraged business community that there really were unworkable, and then bungled their withdrawal. In a few days this deeply foolish finance minister destroyed his own reputation and crippled the government's. .. Pearson's real mistake was in not having accepted Gordon's resignation. Gordon's further mistake was in not having insisted on resigning." Michael Bliss, 'Right Honourable Men', Toronto, ON: HarperCollins, 2004, p. p. 225-226.
    Some would still have us believe that investment money from outside Canadian territory or by people with varying connections outside Canada somehow lacks some ill-defined, touchy-feely "national" spirituality: this is a highly discredited notion that belongs to Walter Gordon-style fantasies, and have no part in brutally prosaic investment analysis of the real estate markets. As it has been said, why would my neighbour sell me a house for less than it is worth simply because I am supposedly more "authentically" Canadian than other bidders? This simply not how money and property markets work.

  • by Mr. Bigglesworth 2016-07-29 5:06:39 PM

    When we have realtors from Royal LePage, and staff from an Australian non-profit (read: non-elected, non-accountable, non-relevant, and in this case non- informed), PRE-proclaiming the 15% transfer tax to be an unmitigated disaster, before its effects are even known, we risk the atrophy of careful, reflective thought in our society. Much like the uninformed seepage that oozes from the unthinking, child-like mind of Donald Trump, these industry participants, (and let's be honest, that's all they are), also proffer superficial opinions that are as devoid of research-driven data, as they are of intellect. Just look at what the realtor writes:
    1) ".....buyers backing out...". (Where to start with this one?), anecdotal ?.....trump-style (uninformed) alarmism? ...entirely missing the point that, in moderation, this is entirely THE INTENT of this tax policy? Think of it this way, sir, if it helps you: if CRA announces they're going to increase the top-scale marginal tax rate by, say, 1%, only in the year they purchase a new house ...(that's right, an announced tax policy change that will occasionally increase SOME privileged taxpayer's costs, has social licence, and is deemed by experts in tax policy, -real experts, sir) , to be fair and affordable, and addresses an inequity...and then imagine that you "hear" that " someone" is reconsidering how much they are now going to have to re-work their capital gains calculation....OMG!!...lets repeal that policy change before it sees the light of day!..we can't have people paying more money when they're buying their multi-million dollar tear-downs on the Westside!! Would people opposed to this tax be similarly opposed to a sur-tax on luxury yachts over 2m? I think not. But on houses, it's apparently WAY off limits.
    2)" ...the provincial government really should have..." ( is the realtor in ANY way privvy to the research, expertise solicited, and analysis that the government actually DID do? Again, I think not ) ....."....retroactive tax..." (well, retroactive only for the minuscule number of deals that have already been done, but close after Aug 01) "...just not sure this was thoroughly thought out"....( then do what I do when I'm "just not sure" of something: listen, don't speak ;)...try it! It's easy!
    Reading the Australian blogocrat's words is similarly amusing. A charming mixture of uninformed drivel and speculation from the intellectual wasteland that is that neoCon penal colony, and utterly missing the point that constraining demand, with an attendant revenue bump for Victoria, is precisely what the policy strives for. Now, will this policy have unintended consequences? Sure, all policy changes do, but that's not a rationale for abandoning them. Look at Singapore, and what happened there....look at Toronto, and what's NOT happening there. Furthermore, let's face it: the Vancouver and Toronto markets currently feature bids going "over-asking" by an amount eerily similar to the 15% the two "real estate professionals" are protesting as the death-knell of the industry and market as we know it. As well, in a market wherein purchasers are happy to pay about 30% more every year, (for the same house), then this 15% represents paying the price that the house would have sold for 6months down the road, perhaps the "professionals" will ponder that, between bouts of unintelligent drivel
    Let's call it the way it is: where you stand on this matter largely depends on your personal involvement. Homeowners preparing to list their homes will of course oppose this new tax, for obvious reasons: realtors, who have been making commissions that I think most people would agree, are obscene, will lament the tax as repressive, (yup, it's meant to be, Einstein) we know where they will stand on any policy that tempers that commission potential...(like the elimination of double-ending deals, and "shadow flipping")...and prospective purchasers will see it as anything from an irritating little cost that changes precisely nothing, to a new cost that will cause them to re-asses their budget from a house that costs 2 m to something more like 1.7. Life is truly difficult, sometimes. ....Set against these few privileged individuals that none of us really feel too very sorry for, is the VAST number of Vancouverites that quite literally will never own a home in the City of Vancouver. ..or even just move up the property ladder the way we have all historically done.
    In those quiet, introspective moments (if any), when not pustulating on government policy, or a market on the other side of the planet, I wonder if these "professionals" ever have a moment of clarity, a Moment of comprehension, wherein they understand that most mainland China capital inflow is not because these purchasers intend to live, ( let alone integrate) in these communities. Our city is being used as a bank, plain and simple...a bank that has lately been paying Juicy dividends. But even if it flatlines, that's still just fine with them, as fixed income yields negative real returns, global stock markets are unprecedentedly volatile, and macro-economic events remain scary. Against this backdrop, our bank, (er, I mean houses), look extremely attractive. Does the reader really think that these "industry professionals" really care about mainland Chinese having to pay a tax on parking their money in our city, until such time that it's convenient for them to pull it back out? Obviously not: they are opposing this tax purely for the potential effect it will have on their commissions, due to fewer/less expensive home sales. A 15% added tax will not deter the great majority of these buyers...nor should it: we're still cheap, by many global standards. The bigger question to ask is not how it will affect Chinese multi-millionaires, but rather will it benefit the citizens of Vancouver, especially future generations. This will only be answered when the effect of the tax is known. Until such time, Trump-like hyperbole is unhelpful, at best.
    So to recap: "professionals": please stick to your skill-set: showing houses and apartments, and filling in sales contracts. Leave the government policy analysis to those actually able to offer informed, thoughtful analysis. ( especially when you're " really not sure...").

  • by Ivan 2016-07-29 9:58:03 PM

    Mister Biggelworth, thanks a lot for your comment! As a Vancouverite, I confirm that you got straight to the point in all your statements! You couldn't say better, especially about "professionals" worried about their commissions, not real people who actually live here! Thanks a lot!

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