Foreign investment in Vancouver residential real estate plunges after new tax introduced
Total value of residential sales involving foreigners plunged from 16.5% to 0.7%
By Mike Laanela and Richard Zussman, CBC News Posted: Sep 22, 2016
Metro Vancouver residential real estate sales involving foreign nationals plunged after the province introduced a 15 per cent tax last month, according to data released this morning by the B.C. government.
In the seven weeks before the tax was introduced (June 10 to Aug. 1) the total value of all residential sales involving foreigners nationals was $2.3 billion.
After the tax was introduced, the value of sales over a four-week period (Aug. 2 to 30) plunged to $49 million.
The number of transactions involving foreign buyers also plunged, from 2,034 deals closed in the seven-week period before the tax, to 60 total sales in the four weeks starting Aug. 2.
In the month after the introduction of the new tax, the percentage value of sales involving foreign buyers also fell from 16.5 per cent of all sales to 0.7 per cent, the latest numbers revealed.
Sales spiked on final tax-free day
The data also revealed a huge spike in sales on the final business day before the tax was implemented.
"On July 29, 2016, more than $850 million in residential property transactions involving foreign nationals in Metro Vancouver was registered at the Land Title Office," said a statement released by the government.
This is equal to more than 55 per cent of all transactions registered in Metro Vancouver on that day and almost 40 per cent of the total foreign investment in Metro Vancouver residential real estate for the entire period after data collection began and before the additional tax took effect (June 10-Aug. 1, 2016).
B.C. Premier Christy Clark has yet to comment on the latest numbers, but earlier this month said the tax was having the intended effect of calming a "distorted market."
"The prices were going up way too fast and if we helped slow that down, that's good," Clark said.
Tax aimed at reducing speculation
The province introduced the tax with the goal of reducing speculation by foreign investors and to cool the city's red hot real estate market.
The new rules apply to home purchases in Metro Vancouver, excluding the treaty lands of the Tsawwassen First Nation.
But, already, a class-action lawsuit has been filed in B.C. Supreme Court on behalf of virtually all non-Canadians who have been forced to pay the tax.
The data announced Thursday was collected using a new rule introduced on June 10 that requires buyers to disclose whether or not they are Canadian citizens or permanent residents when they purchase a home.
Previously released data collected before the introduction of the tax indicated foreign buyers represented about 10 per cent of the value of all real estate purchased in the region from June 10 to July 14.
Sales numbers declining
A month after the introduction of the tax, the Greater Vancouver Real Estate Board revealed the number of homes being sold had dropped significantly and prices had stalled since it came into effect.
But there has also been a bump in sales outside the Metro Vancouver region, where the tax does not apply, numbers have shown.
The City of Vancouver is also taking steps to introduce atax on homes left empty or vacant for most of the year, to get residences owned by speculators and investors back in the rental pool.
Earlier this month, the province credited revenue from another tax — the property transfer tax that applies to all real estate sales — for helping it book a $730-million budget surplus.