Foreigners bought 9.7 per cent of homes recently sold in Metro Vancouver, according to the latest real estate transaction data released by the B.C. government.
That’s significantly higher than the earlier tally of 5.1 per cent issued by the province a few weeks ago on the earliest data.
The new numbers are based on nearly five weeks of transactions from June 10 to July 14 and represent a total of $885 million worth of residential real estate that was bought by foreign nationals during that period.
The release by Finance Minister Mike de Jong came a day after the province announced it would impose a 15 per cent transfer tax on residential real estate purchases by foreign nationals in Metro Vancouver.
De Jong expects the tax will reduce the pace of foreign investment now happening in Metro, and acknowledged it could result in foreign buyers purchasing more property in other B.C. regions.
If the current pace of buying by foreigners in Metro continued, it would translate into $9.2 billion a year worth of transactions subject to the new tax, and nearly $1.4 billion in additional property transfer tax for the province.
The impact of the tax is yet to be seen, de Jong said, adding he expects it to generate “some” rather than “a lot” of extra revenue, which could support affordable housing and rental assistance initiatives.
De Jong defended the government’s choice of a higher property transfer tax at the time of sale rather than alternate proposals of an elevated annual property tax from which Canadian citizens or working residents could be exempted.
“If the argument is that a two per cent increase in property tax levied a year from now is more effective than a 15 per cent increase in tax that will take effect next week to reduce international participation in the residential real estate market, I just don’t buy that,” de Jong said.
“it’s far more reliable than anything else we have.”
The new tax doesn’t apply to non-citizens who have permanent residency status.
The province has been criticized for leaving the door open to deals paid for by foreigners but run through their relatives already in Canada. The tax will cover foreign citizens here on student or work visas.
De Jong also downplayed the impact of Quebec’s immigrant investor program, which extracts revenue for that province from arriving Chinese investors who critics say often ultimately settle in Vancouver. Because they gain permanent residency status, their property deals wouldn’t be taxed.
He noted there’s no way to preclude those arrivals from moving where they want in Canada.
“I think this is beginning to take on a little bit of a conspiratorial theory that vast loads of people are arriving in Montreal with a Vancouver baggage ticket,” de Jong said.
He said that while some of that happens, the bulk of foreign investment in B.C. is from other sources.
The new tax will apply on transactions where the property transfer has not yet been registered as of Aug. 2, despite objections from realtors that it may disrupt deals that have not yet closed.
The province will ask Canadian citizens or permanent residents to verify their status by providing social insurance numbers, which foreign nationals wouldn’t be able to supply. Audits are also promised, along with penalties for those who try to dodge the tax.
But de Jong said he opposes targeting new real estate taxes to those who own expensive homes but have suspiciously low incomes and pay little to no tax.
“There are a lot of seniors who are cash-poor but bought their homes 40 years ago.”
NDP housing critic David Eby said foreigners who become permanent residents through the Quebec program are a “huge” concern.
He said they often buy Lower Mainland property but pay very little in tax because they’re paying taxes elsewhere in the world.
“I don’t think we should be selling citizenship,” Eby said. “I think it’s inherently offensive to people who waited in a queue who worked hard to become Canadian citizens.”
He reiterated his position that extra taxes are justified on people who don’t pay tax here and merely use B.C. real estate as an investment asset for foreign-sourced money.
“If you don’t get at that international money, you’re not solving the problem,” he said.
Eby also said the new foreign transfer tax may accelerate speculative flipping of pre-sale condo contracts, which won’t be charged the tax until they’re built and registered by a final buyer.
“I don’t know why they wouldn’t deal with it except perhaps that the king of pre-sale condos is in fact the premier’s chief fundraiser, Bob Rennie.”
He said the new data proves foreign buying is “a much bigger problem than they ever acknowledged.”
The province will monitor the transaction data to see if foreign activity jumps in other regions of B.C. as a result of the new tax.
About 3.5 per cent of transactions in the Capital Regional District and elsewhere in B.C. involve foreign nationals. The value of those foreign purchases were $30 million in the CRD within that five-week window, and about $139 million in all B.C. regions outside of Metro.