British Columbia Vancouver

BC’s 2018 Budget Takes Aim At Vancouver Real Estate Speculators, Here’s Why

BC’s 2018 Budget Takes Aim At Vancouver Real Estate Speculators, Here’s Why

Canadian real estate speculation has been a huge issue, and BC plans on addressing it. The Province of British Columbia revealed the 2018 budget, along with their 30 Point Plan For Housing Affordability In British Columbia. The plan reveals the most aggressive strategy for tackling real estate speculation Canada has ever seen. Here’s the most important points that will impact real estate prices.

A 2% ANNUAL Speculator Tax

The new annual speculator tax targets both foreign and domestic homeowners that don’t pay income taxes in BC. The tax begins at 0.5% of the assessed value of the home, beginning this fall. It will gradually increase to 2% by 2019. The Province acknowledges most homeowners will be exempt from this tax. Those with high worldwide incomes, paying little to no taxes in BC, are the target. The Province warns that audits will be used to ensure compliance.

Why the tax? BC has been seeing a number of low income households, in very pricey real estate. This has made some suspicious that international income is not being declared by many homeowners. The rule comes after one of Canada’s largest banks has decided to crack down on a similar issue, when issuing mortgages.

Luxury Transfer Tax Increase

The wealthiest homeowners are being hit with an additional transfer tax. Effective today, February 21, 2018, the property transfer tax above $3 million is increased from 3% to 5%. If that didn’t hurt enough, the province is also increasing the provincial school tax for these homeowners. The Province is sending the message that luxury home prices, are really only for those that can afford it.

Why the tax? These might seem like “eat the rich” tax schemes, but it may tackle an interesting, only-in-Vancouver issue. Tear-downs, houses that a buyer would likely destroy, have been trading to speculators for well over $3 million. The buyers sometimes tear it down to build their dream home. More often buyers are building new “luxury housing.” There’s a whole Facebook group dedicated to the historic homes lost, that’s worth checking out. The Province wants to make sure you really want that home. If you don’t, they want to make it harder for you to make a profit on the flip.

Increasing The Foreign Buyer Tax

The expansion and increase of the province’s foreign buyer tax is effective as of today. The 15% tax levied on property transfers to non-residents buying in Metro Vancouver, will be increased to 20%. The tax will also be expanded to the Capital Regional District, the Fraser Valley, the Central Okanagan and the Nanaimo Regional District. The expansion will prevent any non-resident speculation from spilling over into neighbouring communities.

Why The Tax? It’s BC. Non-residents buy 1 in 5 condos in Vancouver, according to the CMHC. Condos are the starting point for homeowners, and placing excess pricing pressure breaks the chain. Many young people with pretty good jobs, can’t begin their homeownership journey. You know… if they’re into that kind of thing.

Even worse, the 1 in 5 overseas buyers are only the ones that hold the property through completion. The foreign buyer tax does not address speculators engaging in pre-sale flips. For them, there’s the next measure.

Cracking Down On Pre-Sale Flipping

The province is creating a mandatory database of condo-presale buyers. Previously, only developers knew who were buying and flipping properties. The BC government would like to know who these people are, how often they do it, where they’re from, and ensure they’re paying the right amount of taxes. This information will be shared with federal tax authorities. More important, it will give the province some hard numbers on whether this is a real or imagined problem.

Why The Tax? For just a 5% down, you can play the condo speculation game. Across Canada, condo assignments are being used as an impromptu real estate derivatives market. You buy a pre-sale for 5% down, and try to sell the assignment to someone else before you owe the next 5%. It’s kind of like margin trading for the stock market, or buying options.

For example, you can buy a $1,000,000 condo assignment with just $50,000 down. Before the next 5% is due, you attempt to sell it for a 5% increase. If you close that, you made $50,000 on a $50,000 investment. Heck, even if you get half – you’ve just made a 50% return. If you do that often enough, it should be taxed like a job – just like regular traders get hit with.

Moving To End Hidden Ownership

The Province is looking to track beneficial ownership of property. That is, who actually owns every home. The Land Title and Survey Authority will now be requesting additional information on property transfers. A publically accessible registry of beneficial ownership of all properties will also be maintained by the province. The information will be shared with tax authorities, and law enforcement, to ensure compliance with the law.

Why The Tax? No one’s really sure how big of a problem hidden ownership is, but there’s some signs it’s not a great situation. Transparency International Canada found that half of Vancouver’s most expensive homes, had anonymous ownership structures. Some people just like their privacy, after all who hasn’t had a lunatic reader show up at their home? However, politicians have expressed concern that masking ownership is being used to dodge foreign buyer or land transfer taxes.

Which strategy do you think is going to have the most impact? Let us know in the comments below.

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39 Comments

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  • Ban Foreign Ownership 10 months ago

    Foreign ownership should be banned completely, other 20% is just the fee for laundering money. New Zealand did it, and no one there is crying racism. This just shows you that the BC government is still owned by the real estate industry.

    • Z 10 months ago

      Seriously. People need to stop with the xenophobic measures. Vancouver is a place where people of all races and colors live, and there’s few places anywhere else in the world like it. Those that have been left behind by a lack of job opportunity, and a clumsy government, are taking it out in nasty ways. Seriously, do some meditation and chill.

      • MH 10 months ago

        “The province has asked the federal government to create a multi-agency group to target tax evasion, money laundering and housing, according to budget documents.”

        https://www.bloomberg.com/news/articles/2018-02-20/british-columbia-extends-housing-crackdown-with-tax-increases

      • Knotmi Reelnm 10 months ago

        Go home. I want space to raise my children without competing with the wealth and demand of China, obtained through objectionable means. If you want to contribute to Canada then invest, don’t steal ours homes.

      • bluetheimpala 10 months ago

        Agreed…this isn’t a race issue it is a ‘candians getting fucked’ which is not a colour…well maybe sort of like a shit brown with a bit of blood in it.

      • 40k a year millionaire 10 months ago

        Z,

        you missed the point of the comment that states ” no one there is crying racism” which makes it about the issue itself, excluding the Controversial Topic of race.

        Then you follow through with a social justice warrior response to make it about race.

        Clearly you are the one that needs to meditate and chill. The media brainwashing, and the need to virtue signal has gotten to you.

        • Roger Troutman 10 months ago

          It’s definitely not about race.

          It just sounds like it’s about race, and it targets mostly people of one race, and we just happen to not like much about their culture or or ways and would prefer they stay in their country.

          But it’s definitely not about race and we’re definitely not racist.

          • Roberto 10 months ago

            Baloney. This is most certainly NOT about race. The fact that YOU are trying to make it about race does not make it so.

            This is about rampant real estate speculation, fueled by money not made in the province, causing a real housing crisis in the Lower Mainland, and to some extent on Vancouver Island. This is about the government finally taking steps to enforce the laws of the land to reign in this speculation. If you don’t like it, sell your property and move.

  • David Z. 10 months ago

    Taxes are a nice temporary measure, but they ultimately result in the cost being transferred to the next buyer (usually local). The CAC, the foreign buyer tax, etc. have ALL shown that this is the case. The BC government has effectively ensured that prices will go up more than 20%, but the province will collect half as income taxes. *slow clap*

    • bluetheimpala 10 months ago

      Taxes are only a small slice my friend. it is the transparency and scrutiny that will have the biggest impact. Don’t get it twisted, it was China who initiated more transparency as Canada has zero leverage over such a rouge state. Xi wants his capital back. Too many have gotten fat but aren’t bringing it back to China (shocker!)…now he is done. Russia did it in the last few years. Saudi Arabia just did it. These are very similar cultures in terms of graft and state sponsored illegal/unethical behaviour.
      Remember: the #1 exporter of Fentanyl to the West is China. If anyone thinks the government didn’t allow capital to exit to buy up real estate and initiate a crash in a number of countries then you don’t know China…they are always playing the long game and the government is in every piece of business!

  • Orange 4 Life 10 months ago

    Great first budget from the NDP, and we look forward to making continued progress as we go forward!

  • MH 10 months ago

    “Across Canada, condo assignments are being used as an impromptu real estate derivatives market.”

    Precisely. Finally someone is calling it out. Anyone who understands the subject at least a little bit, knows that it’s a recipe for disaster. Low entry, huge leverage. On top of leverage.

  • Ava 10 months ago

    We need similar measures in Ontario

  • bluetheimpala 10 months ago

    Tick.Tock.Tick.Tock…Any man’s death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee.

  • Knotmi Reelnm 10 months ago

    This is a good start. Let’s make sure Ontario follows.

  • loraine james 10 months ago

    It is despicable that governments are being forced to comply with global corruption to the point where its citizens are tossed out of the economy , communities, yet still pay their fair share of taxes and work in all sorts of professions serving humans in all aspects.
    Canada has become an off shore haven for 30 % of the worlds wealthiest people who’s morals are based in fear of not having enough even at the expense of those who serve them.
    Paris France has raised the foreign property ownership tax to 60%. New Zealand band foreign ownership altogether.
    Those getting rich on this corruption will continue to find ways to support it while more and more citizens that do not have skin in the game/scheme will need to use food banks and pray for ten $ a day child care just to pay the rent or mortgage. And More and more people will be taking transit to work for their tents.

    • Justin Thyme 10 months ago

      Feeling a bit like the Chinese citizen during the height of British imperialism, who was locked out of their own country’s real estate, perhaps?

      • bluetheimpala 10 months ago

        Locked out of mainland China? Oh Justin, quite blathering…if you mean Hong Kong, the British owned it and gave it back. And when was that 150 years ago…still butt hurt?

        China is attempting to steal land/water/air rights right now. The only solace I have is that China is a mess and, even though they like to think they are in control, they are still at the whim of the British and the American.

        Little ol’ china..one day you’ll be a big boy!

        • Justin Thyme 10 months ago

          I mean the sign in a prestigious park in the middle of Peking that said ‘No Women, No Dogs, and No Chinese.’

          Methinks you should really research British Imperialism. It is not just Hong Kong the British made the Chinese second-class citizens in their own country.

        • z 10 months ago

          what are you talking about… all of your comments are so .. childish… anyways. as far as we are concerned, the state of china does not concern us…
          it’s getting a little unstable so we want to move the assets here…

          btw… I am Canadian citizen and my wife holds Chinese passport… I guess I am ok right?

  • Justin Thyme 10 months ago

    When the big-pocket developers and investors, major contributors to political campaigns, allow the politicians to FINALLY make these moves, you absolutely KNOW they have left the field, and their money is protected.

    What more proof does one need that the smart money has long ago left the field. They are no longer in a position to loose anything over this legislation. Only the stupid money will now loose.

  • Schmoltz 10 months ago

    Yes, the foreign buyer’s tax has been increased to 20% but its the requirement to now disclose who a is actually buying the property which is going to have the biggest impact. If you asked a lawyer about the initially Foreign Buyer tax there were some many loopholes in it you could drive a “cruise ship” through it. Now there are fewer ways around the tax.

    • Justin Thyme 10 months ago

      It also makes it far easier for audit purposes. The ‘guy next door’, who suspects an undeclared foreign buyer who has avoided the tax, can now check it out.

  • Justin Thyme 10 months ago

    One thing is conspicuously missing.

    A 20% withholding tax on the sale proceeds of any real estate SOLD by foreign buyers, in lieu of capital gains tax, weather to a Canadian or another foreign buyer, payable upon closing. Much easier to apply, than trying to get them to file under Canadian income tax.

    Thus, not only do foreign buyers pay 20% on purchase, they pay 20% on selling.

    Apply this to pre-sales, as well.

    • Brian 10 months ago

      Totally agree, double-end the foreign/non-resident real estate buyer’s tax with an additional tax from the proceeds of sale. Upon closing the sale, the foreign/non-resident seller’s lawyer would be required to withhold the tax from the proceeds of sale and submit the tax to the government and, if they don’t, they would be held financially and criminally responsible. This way, the government gets tax at from the non-resident purchase and sale, lower tax at purchase and, probably, higher tax revenue at sale.

  • Willy 10 months ago

    What effects will this have on cities in other provinces like Ontario, Alberta and Québec?

  • bluetheimpala 10 months ago

    Fed minutes are out! Fed minutes are out! More hikes as expected. BoC will follow. To paraphrase Goldmember “I like my monetary policy ‘toight like a toiger’ …”…I’m off to buy some lube and a bottle of Jack so I can ease my pain.

  • Bob 10 months ago

    A long-time local realtor recently told my wife that she has gotten rich selling Vancouver houses to offshore buyers, but has never made a nickel selling a house for them.

    If true, it will be interesting to watch and see if any of these policies actually inspire some selling. There are some very very strong ‘buy and hold’ forces to overcome. That said, I believe the speculators tax will apply to far more houses than anyone realizes – I hope they can force a high compliance rate, so that all locals can benefit. So far this new government deserves the benefit of the doubt. Well done.

    • Schmoltz 10 months ago

      That’s a question I keep asking myself. Why is there such low inventory of homes? It’s not just here either. The U.S, Australia, and Europe all have a low level of homes. It will be interesting to watch, will the foreign speculator still hold to these properties even if they are not realizing price appreciation.

      • Roger Troutman 10 months ago

        One rule a lot of asian cultures abide by when it comes to real estate: once you acquire a good property, you never sell it.

        I think this lesson escapes a lot of the good ‘ole born and raised Canadian folk on these boards and others. Most of these newcomers are not trying to speculate and cash out, they’re in it for the long run and in are buying to build wealth for their kids and grandkids.

        • Alistair McLaughlin 10 months ago

          That a given behaviour is motivated by a long-held cultural belief doesn’t automatically make it a good strategy. Some people have to sell. Divorce. Death. Illness. Loss of income. Even rich Mainlanders must experience some of those things some of the time. Also, if this latest round of regulations and taxes doesn’t work, there will be more, and more, and more. Sooner or later, those foreign residents who wanted to hang onto their property and “build wealth for their kids and grandkids” will be forced to sell because economically, owning the place won’t make sense anymore. This will be called racism and xenophobia, but I think the new orange government proved this week that those accusations aren’t as effective as they once were.

          • Roger Troutman 10 months ago

            ‘ Some people have to sell. Divorce. Death. Illness. Loss of income.”

            Uh, yeah I’m pretty sure they experience those things since they’re also HUMAN. Geez.

            Divorce =split the properties and hold or pass to children
            Death=pass properties to spouse and children
            Illness=pass properties to spouse and children
            Loss of income=property already paid for or adult children take over

            Unfortunately for those hoping taxes will somehow lower the price of real estate, these new policies could backfire. At best, they might stem demand temporarily as locals who need housing stand on the sidelines to see how these measures play out.

            Meanwhile as prices flatten or drop, and construction labor is focused on affordable housing the gov’t is pushing for we’ll have less free market units being built and demand still growing.

            Also land prices go up because of the new speculation and property transfer taxes. But I guess the gov’t thinks the developers will eat those costs and not pass them on? Or maybe we just need to increase the taxes even more as suggested?

  • C 10 months ago

    Theyre not new coners. They are foreign speculators. And good ole canadian born children dont need to live in the streets because of selfish chinese speculators.
    The market has been distorted by drug dealing money launderers, and abused by foreign real estate speculators.
    This isnt frugle hard working chinese teaching dumb canucks a thing or two about money.
    These are assholes who live in china and are hiding their assets in empty homes all over BC and Ontario.
    And to add insult to injury, banks are no longer able to look at bail-outs from governments, they now have to plan for bail-ins–which mean good ole canadian born canucks like me with money in the bank are on the hook when this housing market hits the shits. Thanks CIBC, years and millions of dollars of mortgages to corrupt chinese…and im on the hook for it.

    Fuck off with your opinions on what the chinese need to teach anyone. And i hope youre single-handededly are willing to foot the bill when their wives, kids, grandkids, grandparents and money scurry back off the china and were left a decimated housing market and banking system. Fucking idiot.

  • Waitingontheintrestrate 10 months ago

    This is not to protect the people that live here it’s just a money grab for the govt. So many people have left Vancouver and it’s becoming a ghost town. How do you run a govt when taxes are not being paid..hmmmm….make one….they don’t want speculators to stop buying they just want to keep the money chain going…..

  • Mike 10 months ago

    NDP!

    NDP!

    NDP!

    You got my next vote if you followup well on these changes.

    Shoo away corrupt liberals.

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