15% Tax on Foreign Buyers – Enough to Change the Narrative?

The important thing is not the direct effects of the tax itself, it is the effect that this may have on the story that locals are telling themselves about Vancouver RE.

From what I informally overhear, many people are talking about the effects of this tax.
If enough people believe that this will lead to dropping prices, drops will occur.
Local owners intending to sell will hurry to realize paper gains; Local prospective buyers will evaporate (see Spot the Speculator).

Speculators abhor falling prices.
Momentum speculators (off-shore and local) will withdraw.
Locals intending to buy far, far above wage or rent determined fundamental values will stay away if they can no longer be ‘certain’ of future price gains.

A market like Vancouver RE circa 2016 (25% gains in the last year!!) is dependent on ever rising prices to suck in new buyers.
Once it is seen, or believed, that Vancouver RE prices can drop substantially, at what level will prices stop falling?
[50% of uber-astronomically-overvalued is still substantially over-priced.]

– vreaa

70 responses to “15% Tax on Foreign Buyers – Enough to Change the Narrative?

  1. Err… they found that 1 billion dollars of foreign investment came in during a 5 week stretch. That is based on voluntary reporting btw. And that is not an insignificant number considering that it usually hits the detached housing of 4 of the smaller regions. I think the effect of this tax might be a little bit more than what people think than just psychology. If I took 10 billion dollars out of the vancouver real estate market, that is pretty significant.

    • Detached house sales are tanking, Brian. Ouch.

      • Note, Sales…. not prices.. oh and we have a long long way to go to anywhere near your predictions.. ouch.. too bad you are still wrong. And btw, it took a government policy banning foreign investment to maybe start to turn the tide… hmm.. local incomes drove this madness right? I wonder where that billion dollars came from?

      • One precedes the other.

      • As bearish as I have been I tend to agree with Brian. This new tax wont affect that many when all is said and done. Lower sales volumes (in gr vanc) possibly due to implementation of tax will likely be offset by a lower currency and continued easy policy out of the BoC. If anything this gives Poloz a little more wiggle room to keep rates lower for longer, perhaps even enough to warrant another cut. Markets outside of gr vanc taxable zone lit up like a wild fire in the weeks and months leading up to new foreign tax and I only expect this to accelerate now. I believe others in addition to bob rennie were not only made aware a tax was coming but that only certain municipalities would be subject to the new tax. all the HAM that has entered Vanc isnt going anywhere. a price crash will occur only if these folks all rush for the exits en masse with their ill gotten windfall gains. Perhaps it will be harder to move more into gr vanc but tax free zones are fair game. Given many of these so called investors dont even live here it makes no difference if the property is in kelowna, victoria or mike de jongs turf in abbotsford.

      • rod_jonsson_pmd

        legit / semi-legit flight capital? 15% won’t dent it … bank fraud and ponzified specu-flipping? game over time to move on … imho … probably see soon enough how much of each

  2. I’m going to agree that this tax is carefully crafted to ensure that it “seems” like it’s doing something, but is likely not to. Krusty and the like really need RE to stay afloat (for income and to win the next election). It’s too far gone and just has to run it’s course — whatever that might mean.

  3. I would have slap on 50% or more foreign real estate buyer taxes to deflate the market back to the past prices and reset the entire economy by causing ripples.There is no fresh start until the old one is torpedoed.

  4. I think Garth also showed the stats where the average purchase price of foreigners are basically the same as average purchase price of the locals. So, no this tax isn’t going to catch what’s really causing the upward price march. If the foreigners are responsible for the $5M Van West houses then the average foreigner purchase prices should be much higher than local average purchase price, which also should have been pulled down by the higher mix of cheaper housing purchases.

    Most “foreigners” who are purchasing the $5M houses are not PR and not affected by this tax. Those people will continue to buy once the shock wears off and things gain clarity.

    There only two ways to bring affordable housing – increase income and/or decrease price. Increasing income is basically impossible in this global competitive labour market, aside from massive tax cut. How likely is the province going to have polices that will lower prices? Next to zero.

    I bet this tax will actually encourage more local buying as locals now think “hooray! I don’t have to compete with dirty scumbag money from China anymore! I can get deals, at least 15% off! Woohoo!”

  5. If gov’t is serious about foreign $$$, which is the real issue, not foreigners then the best option is simply slap on additional property taxes that’s can by offset by provincial income tax. Granted seniors living in $3M house on fixed income will cry foul, but then again I don’t really think it’s the gov’t job to ensure you can stay in $3M house when you don’t make a lot of money. Perhaps, gov’t should tax assets more than active income or have a better balance between asset and active income taxation.

    But regardless, hike the propery tax enough, that’s likely to dampen a lot of speculative activitise as well as garner a nice portion of foreign revenues.

    Now renters kind of lose out since they get no benefits. So maybe the property tax offset only applies to principle residences or to the renter?

  6. I am fascinated by this tax. Such confusion, and frustration by the BC Liberal base. But things had gone on for too long, and people got angry rather quickly. Turns out rising prices are a good thing except when they’re not. Hoocoodanode?

  7. No question this tax is a shallow, populist move that, in a purely rational and analytical market, would have little effect. The issue, as vreaa points out, is its potential to instill fear among emotion-driven speculators and indeed all market participants. This tax is but one of a growing number of recent “shifts in the wind” that should not be underestimated. These include negative media coverage, dire warnings from government and financial institutions, and actual market activity (thinning sales).

    Just as vapid beliefs — “BPOE”, “hard asset”, “immigration”, etc. — helped propel the market upward, so too can they drive it down. So, while the tax itself may not be substantial or effective, it may have important consequences.

    • “So, while the tax itself may not be substantial or effective, it may have important consequences.”
      Well summed up.
      The BC Government has not run out of ammunition yet. If required, a further 15% additional stamp duty on foreign sellers of the Metro Vancouver residential homes should deter the mercenaries.

      Note that the rest of the province is game to all.

  8. the Lib sure does something to look good. as soon as the market takes a breather of 15% south, the foreign buyers move in again. Landless status is still yours.

  9. This should interest the “human-rights” lawyers and journalists.
    The two generals assisting investigators are said to relate to live harvesting of human organs.
    http://tinyurl.com/gplvbxb

    • This is one thing you and I can agree on. This is despicable and are the type of behaviors that should be absolutely fined. Honestly, I think the real estate boards of this province are a joke.

  10. Everyone here seems to think this tax is no big deal and will have little effect on foreign buyers. Is that why hundreds, even thousands, of deals are collapsing? Maybe check the actual stats before you hypothesize.

    • #Didn’tGetTheMemo?,Or… #JustAnotherDynasticScionWhoLikesPandas?…

      [G&M] – Ottawa opens arms to Chinese students, tourists and workers

      “Eager to woo waves of new Chinese students, temporary workers and travellers, Ottawa is petitioning Beijing to triple the number of cities where people can apply for Canadian visas.

      With Prime Minister Justin Trudeau expected in China at month’s end for his first state visit, the Liberal government is trying to pry open a larger door to Chinese visitors that can swell university enrolments, place foreign talent in high-tech jobs and bring in new investment cash – even if that means adding to housing demand at a time of overheated home prices.

      John McCallum, Canada’s minister of immigration, refugees and citizenship, landed in Beijing Sunday for meetings with senior Chinese officials at the country’s ministries of foreign affairs and public security. He asked for approval to quickly open new visa application centres in five secondary Chinese cities: Chengdu, Nanjing, Wuhan, Jinan and Shenyang. Those could open as soon as next year.”…

      http://www.theglobeandmail.com/news/world/ottawa-pushes-china-to-boost-visa-application-sites/article31328849/

      • Mixing politics with business is a bad combination. It is like saying: “I want your cash, but I have a different take on thievery, larceny and criminal breachof trust.

  11. “Ms. Clark said even if the new measure doesn’t deter foreign investors, the government would receive a boost in tax revenue that it intends to dedicate to affordable housing.”

    Singapore boosted to 15% from 10% the fee added to the purchase price of residential property bought by many foreigners in 2013.
    ~ sales volumes down 40% in 2015 from a year earlier
    ~ or down 80% from a peak in the third quarter of 2011
    ~ no mention of prices coming down, if any I suspect it wouldn’t be significant
    source: http://tinyurl.com/gpgqst9

    Hong Kong introduced a 15% tax in 2012
    ~ sales volume down 70% initially
    ~ but prices continued to climb
    ~ more taxes to thwart speculative home-buying by locals
    ~ market started to soften last year, but has strengthened again this year
    source: http://tinyurl.com/z84b2lb

  12. For all those YVR home reno “investors”…

    • [G&M] – Ottawa poised to ease rules for temporary foreign worker program

      …”Immigration Minister John McCallum tipped the government’s hand this week in an interview with The Globe and Mail in China when he said the Liberal government will make it easier for companies to bring in foreign workers.

      “We’re also going to reduce some of the barriers and the silly rules … in order to give companies freedom to bring in the best and the brightest,” said Mr. McCallum. “We’ll get rid of many of these [required] labour-market impact assessments which slow things down enormously.”…

      http://www.theglobeandmail.com/news/politics/ottawa-expected-to-introduce-new-rules-for-temporary-foreign-worker-program/article31365448/

      #InOtherNewsTFW…

      [CBC] – City of Vancouver names former director of city-wide planning for San Francisco as new chief planner

      http://www.cbc.ca/news/canada/british-columbia/vancouver-chief-planner-1.3705163

      • AKA our corporate sponsors want foreign slave in now!! If we really have a skill & experience & talent shortage, why are we paying foreigners below market rates?? Shouldn’t we instead be paying above market rate / premium to attract the talents we don’t have?

        Also, what’s wrong with training new employees?? Or not counting foreign work experiences of actual technical immigrants??

        But if I were an employer, or in need of a few young hot live-in nannies, I’m sure my views would be totally in-line with the new policies.

  13. Beijing brings in strict new migration policy to cut city’s population
    Grading system is similar to one adopted in other megacities like Shanghai
    “Under a system similar to ones adopted in other megacities such as Shanghai and Guangzhou, a migrant will be graded according to their contributions to the city and qualifications such as education or age. He or she cannot obtain permanent residency, which is tied to a series of social benefits that migrants do not get, without gaining enough grades.”
    http://tinyurl.com/jl6tqu8

    Suzhou officially today kicks in the new measures announced last March, and has since tightened mortgage qualification criteria from May 24th, to quell speculative investment from non-residents.
    “Buyers hoping to borrow money for purchasing a home in Suzhou will first need to prove at least one years’ social security contributions in the city, as well as a minimum of two years’ local income tax receipts, in addition to proof that they have lived in the city for at least a year.”

    Also effective today (August 11th), Nanjing investors taking out a second mortgage, must put 50% down-payment. If it is the first (only) mortgage, the buyers are required to foot a minimum of 30% down-payment.
    sources: thepaper & mingtiandi

  14. 535 E 31st: Has all the charm of a Canadian Tire toilet – modern poop floating in a buoyant market. The best thing about it is the view of the graveyard. If the foreign investors don’t buy it, blame it on the 15% tax.

  15. 5838 Dumfries – the spec builders aesthetic – not a clue. Staging by college frat boys – gotta love all that stuffed furniture in the kitchen. It’s a white elephant that will take on shades of grey and have a short unloved life.

  16. If prices drop even by just 10% in the area affected by the tax, while surrounding area don’t or maybe even increase, the locals will stop selling and moving out of the city. So what you end up with, won’t be much different. In the surrounding areas you’ll get more foreign buyers and fewer people moving out from Vancouver.

  17. 3125 Charles – bought March 2015 for $870K – flipped 6 mos. later for $1.020M.

    11 mos. later, renoflated to $1.399M.

    • [LAT] – To be young, rich and Chinese in America: Amid all that flashy spending, a sense of loss

      …”In exchange for a membership fee that eventually swelled to $20,000 a year, Prime Union organized private jets to Las Vegas, threw parties where members could eat sushi off the nude bodies models and rented out mansions in the Hollywood Hills to show off their flashy cars and throw more parties.

      Rong says he started the club because he wanted to “change the image of Chinese people” in America — an image, he believed, that consisted of little more than infrequent, unflattering roles in film and television, like Ken Jeong’s turn as Chow in “the Hangover” movies.

      There’s a saying in China: People will laugh at someone who is poor, but they will not laugh at a prostitute.

      — XiaofeiLi, a political science professor at York College of Pennsylvania.

      Prime Union members, Rong said, didn’t need to wait for acceptance and respect — they could buy it, and they could buy the clubs that wouldn’t admit them, and throw parties where Chinese guys get all the girls. Their slogan reflected an almost nationalist ethos: “You were born differently. It’s in your blood.”

      But that part of his life, Rong insists, is in the past. He quit the club a year ago. It wasn’t making very much money, and after police shut down the October event, the club lost its credibility with members.

      The parties had also left Rong jaded. He began to see that many of his friends — the sons and daughters of politicians and industry titans — were unhappy.”…

      http://www.latimes.com/local/california/la-me-headlines-chinese-fuerdai-20160707-snap-htmlstory.html

      • There’s a great DVD called Born Rich. The über privileged spawn depicted are hard to envy. There is the witticism “I’ve been rich and I’ve been poor – rich is better” has validity. It’s no panacea.

        If you were a Slovenian super model would you be willing to suck lips and spread ’em for the Donald. Didn’t think so. No, bought and paid for with a prenuptual that would have been vetted by sixteen lawyers.

        Wonder how she gets along with Donald’s spawn, esp. the two Bill Maher calls F..k face and S..t for Brains.

        Like John Lennon said, it’s about loving someone and them loving you back.

        One of the characters in the DVD said he wished he were indispensable. He felt, justifiably, useless. Don’t get out your violin. He was still a rich obnoxious a’hole.

        One of the few born rich that did something useful was Philip Johnson (of Johnson and Johnson). He liked architecture – built some stuff.

      • Oh, what a champion of the poor you are, Arnie!

        Got news for you. To a Sub-Saharan African, you are every bit as filthy rich, spoiled, entitled, and obnoxious as those who you see as such.

      • rod_jonsson_pmd

        abandon a dog in the wild, offer another unlimited food … how will it be when the two meet someday? … otoh, people aren’t dogs and the prince siddhartha found a way

      • I wasn’t sure if it was newsworthy when I first read it in June. But since the media has gone this far ~ “a picture speaks a thousand words” ~ here it is.

        gist of the news:
        – Bloomberg and SCMP (2016 June 15): “Sun Hung Kai Properties offering loans worth 120pc of flat value to boost sales of Yuen Long project”
        – WSJ (2016 August 10): “123% mortgage deals may be too sweet”

  18. “illicit resident” sans-ID
    Hailed from a Sichuan village with only 2 years of elementary education, she purchased through the internet a fake ID, complete with a double-PhD from the National Defense University majoring in Computer Science and a military rank of “Colonel”, researching on the “satellite orbit”.
    Her fake ID saves her from the misery of a paper-less (HUKOU-less) member of a “black household”, without which she cannot travel on the high-speed train and the domestic flights amongst other “cant do” stuff. As cupid would have it, she is married to a real PhD, a real Central military cadre for six years, before her creditors exposed her accidentally.
    http://tinyurl.com/z47hn8u
    http://inews.gtimg.com/newsapp_match/0/485029648/0

    Imagine McCullum’s windfall recruiting all the “HUKOU-less” without the financial burden of nine visa offices in one single country, whose “human rights” record is constantly gnawing him.

  19. some countries call them bank drafts, notes, negotiable instrument, etc.


    Bank’s fake bills of exchange
    http://english.caixin.com/2016-02-25/100912548.html

  20. A Chinese envoy in Vancouver has been vocal about our housing policy, but stops short of telling us that his country may have even worst problem.
    …………………………
    Local Governments Tighten Home Purchasing Rules to Prevent Property Bubble
    Tougher requirements on purchasing a second home in several major cities sign government was taking a U-turn on a stimulus to boost home sales, analyst says.
    https://tinyurl.com/juj9lre

    • China’s ultra-low new monthly loan data for July was the lowest in two years.
      https://tinyurl.com/h56au52

      Mortgage loans remained a significant source of lending in July. But some analysts question how long that can continue as authorities in an increasing number of cities re-impose curbs on purchases to rein in home-price growth even as other cities encourage buying to reduce the stock of unsold homes.
      https://tinyurl.com/jdqzrdn

  21. 3587 25th Ave E – a fascinating photo tour – the antithesis of staging; an anthropological study; an art installation; a car crash.

    The cat and dog think it’s just dandy. You can smell the property from the pictures.

    Who thought it was a good idea to document this nose-picking ass-scratching dorm aesthetic – this embarrassment of slob living.

  22. Mortgage Borrowers To Share In The Risk

    The government of Canada will need banks and other credit lending companies to pay a deductible in order to keep the taxpayers from being exposed to the risk of the blazing hot real estate markets.

    The federal government will be following through with the advice given by OECD and the IMF, admonishing the country to have the same safety measures as other countries where credit lenders can take care of 90 percent of any losses from loans that have not been paid.
    http://tinyurl.com/gq8bdcl

  23. 阿伯茨福德市现在是房地产的热点,它对外国买家无需15%转移税,请联系专攻该市资深房地产经纪,电话6043001788

    NO 15% TAX ON FOREIGN BUYERS

    Abbotsford is one of the fastest growing city in Canada in Fraser valley region of British Columbia about 50 km from Vancouver with approx 133,000 people as of 2011 census. Abbotsford city comprises majority of English population of 86,660 about 65% followed by Punjabi 24,660 about 18.71% and various other mixed ethnicities.

    Abbotsford connects well with Vancouver via road and through railway from city of Mission 15 mins drive from Abbotsford. Rail called West coast express connects to Vancouver. About 62% people living here work here. Most of the remaining 38% commute to Mission, Chilliwack or Vancouver and its suburbs Surrey and Langley. More than 25% of Abbotsford’s workforce commutes to Abbotsford from other municipalities.

    Abbotsford has about 95 churches, 3 Sikh temples and a Hindu temple. Abbotsford has the oldest Gurudwara built in 1911 in north America and now it’s a national historic site aged over 100 years old.

    Abbotsford is big on agriculture, surrounded by berry farms and one of the major employer here. Abbotsford supplies blueberry, strawberry and raspberry all over the world. There are few lumber mills, manufacturing accommodate large population for employment.
    The city has international airport with easy check-ins, short lineups and affordable parking. There are flights going to all over Canada from Abbotsford international airport. The city has impressive sports facilities 4 huge ice rinks with phenomenal sports grounds with skateboard rinks.

    There are 46 modern well equipped schools with high education standards with diverse educational programs. Good transportation facilities available for students. Abbotsford has a university offer many courses from bachelor to master’s degree programs and lot of trade programs. Ufv is one of the preferred university by international students.

    Abbotsford has three major zones East Abbotsford, West Abbotsford and Central Abbotsford.
    Central Abbotsford comprises mix type of accommodation with lot of condos and apartments with lot of single-family homes. There are churches, schools, Sevenoak mall and a beautiful Mill lake park with paved trail goes around two kilometers in the center of town.

    The town is next to US border called Sumas-Huntingdon border. You can see mount baker which is 47 km from Abbotsford in US. Mt baker is an active volcano and a famous ski resort. People around the world visit Mt baker for skiing and other sports activities.

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