That is a great question! As you have most likely heard or read... on July 25, 2016 the Government of British Columbia announced that... as of August 2, 2016, there is an additional 15% property tax that applies to residential property transfers to foreign entities (a non-Canadian Citizen or Permanent Resident) in the Greater Vancouver Regional District.
The Greater Vancouver Regional District includes Anmore, Belcarra, Bowen Island, Burnaby, Coquitlam, Delta, Langley, Lion's Bay, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, Surrey, Vancouver, West Vancouver and White Rock.
The tax is collected at the time the property transfer is registered with the Land Title Office and it does not exempt contracts that were written before August 2, 2016.
Now.. the timing of this announcement was very strategic. It was right before our BC Day Long weekend with Monday August 1st being a holiday. The Land Title Office is closed on weekends and holiday so anyone wanting to avoid paying this new tax (any many did) were rushing to complete their purchase by Friday July 29th... four days after the tax was announced.
This was "headline news" for Christy Clark and her Liberal Government. The next BC Election is coming up on May 9, 2017 so what a great way to gain popularity in the upcoming election and get more votes.
The goal of this new tax was to put British Columbians first by making housing affordable; however, to make housing affordable... introducing a new tax may not be the way to do it.
Vancouver is a desirable city! A great city to have and raise a family in! The air is clean (you do not have to wear a mask). The climate is good and getting better with global warming. It is safe and we have one of the world's best medical systems! I am born and raised here and I appreciate Vancouver more and more every time I come back from visiting another country, province or state.
Foreigners that want to be here and want to raise their family here... they will have no problem paying the additional 15% tax. Those that were buying and flipping or buying for speculation... they (I am hoping) will most likely think twice.
The reason why Vancouver real estate prices were shooting up so quickly this past year was supply and demand. On average... when we have less than 2 months of inventory we see price appreciation of 5% to 10%. When we have more than 6 months of inventory we see price depreciation of 5% to 10%.
Let's not forget that we had the Winter Olympics not to long ago (2010) and millions upon millions of people saw Vancouver and have remembered it. The Canadian Dollar is low so Vancouver looks to be on sale to the Foreign buyer as their money exchanges better each time our dollar drops.
With their being only 3.6 months of supply for detached homes and 1.6 months of supply for attached homes as of July 31, 2016... 34% less homes on the market this July when compared to July 2015. The reason for the prices increasing is supply and demand. So for prices to change... or to make housing more affordable... we need more supply and less demand.
Will this new foreign tax increase supply and lower demand? It is to early to tell.
It may lower demand in the sort term... however, It will not change the demand for Vancouver being a great city to live in.
It may increase supply based on the fact that there are less sales; however, I do not see it being able to reach the Buyer supply levels unless there are a lot more homes built or, that come on the market
To make housing more affordable in Vancouver, I would like to see a reduction in the Property Transfer Tax that is charged and ultimately no Property Transfer Tax being charged to British Columbians.
I do not mind having a Foreign tax as I do believe this can help reduce the number of speculative investors that come into our market and raise prices... only time will tell. In the meantime, I will follow the market and will keep us updated on its supply and demand so come back to check the monthly stats soon.