The provincial government should think twice about Victoria’s request for a foreign-buyers’ tax on real estate — and Victoria council should give it a second thought, too.
With one of the three hottest real-estate markets in the country, Victoria has a problem of affordability and availability. In response, council has asked the province to impose the same 15 per cent tax that it authorized in Vancouver, and that Ontario has announced for Toronto.
But it’s not clear whether one is needed here, or whether taxes in the bigger cities will have the desired effect.
Naturally, one fear is that if such a tax squeezes buyers in the first- and second-hottest markets, they will bring their money to No. 3 Victoria, making our situation even worse than it is now.
However, there is a debate about whether Vancouver’s tax is having an effect here, or whether Toronto’s will have any effect.
Bank of Montreal chief economist Doug Porter said the Vancouver tax is pushing up prices in Victoria, but Victoria real estate agent Tony Joe said it has had no effect.
Porter said Victoria is the only city outside of Ontario with a double-digit-percentage average price gain in the past year, with the home-price index up 20 per cent year over year.
On the other hand, Joe said: “The reality is that the people that were doing the speculation or land-banking in Vancouver were only looking in Vancouver.” He said Vancouver and Toronto are global cities, while Victoria is not.
Even in Vancouver, it appears that the number of home sales has been climbing recently, after dropping significantly when the tax was introduced.
Victoria Coun. Margaret Lucas said she doesn’t believe “there’s a lot of evidence yet to tell us that this has been the solution.”
The target of the tax is foreigners with deep pockets who can afford to bid up prices for homes they might or might not live in, leaving locals priced out of the market while hundreds of homes sit empty.
Joe and others are concerned that a “foreign” buyers’ tax is really a “Chinese” buyers’ tax that is as much racism as economics. But that seems unfair to those who are trying to solve a difficult problem.
If investors from an economic powerhouse are squeezing out Canadians, it doesn’t matter whether that powerhouse is China, the United States or Saudi Arabia or all three. The effect is the same, and the tax would cover any rich foreign investor.
At the moment, Chinese businesspeople have bags full of money. If U.S. President Donald Trump lives up to his promise to “make American great again,” American plutocrats of many races could start dumping their excess cash here.
A bigger question is whether we want to throw up walls against “outsiders,” regardless of where they come from, in order to protect our own financial interests. It smacks of the nativism, protectionism and nationalism that are becoming alarmingly common around the world.
If the province does decide to impose a tax, it would be short-sighted to limit it to Victoria. Unlike Balkanized lower-Island residents, foreigners and other Canadians look at the capital region as one city. They would be just as happy to park their money in Oak Bay, Saanich or North Saanich, if Victoria had a tax.
Then those municipalities would come begging for help. Or would they? Affluent residents might be content to watch their home values skyrocket while they tell their baristas and grocery clerks to move to the West Shore.
This is not just a question of personal finance. It’s also a question of values and principles.
