The foreign-buyer tax continues to fascinate. Particularly since a new set of data suggests its impact has worn off, and it isn’t working as well in metro Vancouver as first thought. That raises the prospect — distant at this point — of an increase in the tax, which would be a novel proposition.
Governments traditionally go into idle mode during campaigns. They rarely do anything other than maintain the status quo and react to emergencies. Diving back into the affordability crisis with a dramatic move would be well outside the caretaker norm.
Plus, when was the last time anyone imposed a tax increase in the middle of an election campaign?
Still, a few things tease the imagination. One is that it could be done at the stroke of a pen. The tax was legislated into being last summer, but the rate can be set by a cabinet order. And the B.C. Liberals made clear the 15 per cent rate they set at the outset was not cast in stone and could be adjusted quickly five points either way, depending on circumstances.
Another is that increasing the tax is already promised by some of the government’s opponents. The B.C. Greens want to double it.
Which leads to the third teaser — the tax is apparently a popular item with the public. A poll this week found support for the tax in the 40 per cent range, which for a tax is extraordinary. Hiking it would amount to giving people what they seem to want, which is what campaigning is all about.
An actual move is unlikely. But a promise from the Liberals to make a move if re-elected is slightly more within the realm of possibility.
The new data are in a report from Royal LePage on Vancouver house prices that discusses the chances of a perceived “whiplash.” It’s possible that six months of pent-up demand will be unleashed, sending prices sharply upward again. The projection is based on data showing prices and sales are rising again, after a downturn last year.
The market correction that was underway last year and at least partly attributed to the foreign-buyer tax might be short-lived, said the report. It was sharply critical of the tax, saying it was heavy-handed.
Although the perceived target was Chinese investors, it affected mostly Canadians, said the company. But that reaction is about what you’d expect from a real-estate company reacting to anything that cools the market.
It was an audacious move the Liberals made last summer, when they recalled the legislature in late July and brought in a package of real-estate measures, including a region-specific tax imposed with just one week’s notice. It applied only in metro Vancouver, and on a $2-million home it jacked the property transfer tax from $38,000 to $338,000 for foreign buyers.
One of the bigger question marks was whether it would just drive foreign money to other B.C. markets — such as Victoria — and propel prices up. That doesn’t seem to have happened.
The unique tax sharply curtailed purchases of metro Vancouver real estate by foreigners. They were doing 13 per cent of deals the month before the tax. Last month, they accounted for 3.4 per cent.
It also left the impression prices dropped slightly as a result of the tax — at least for a while.
The NDP had agitated over the previous year or more about the impact of foreign ownership on housing prices but was more focused on curbing speculation by way of a vacancy tax, which the Liberals also provided for in the July package.
The NDP platform now targets “cheaters” who are dodging the property-transfer tax, promises a two per cent “absentee speculators’ tax” and says the limited measures the Liberals took ended up hurting permanent residents. It’s silent on the future of the foreign-buyer tax.
B.C. Greens like it so much they want to double it — to 30 per cent, and impose it all over B.C. They also want a sliding-scale property-transfer tax of up to 12 per cent, a “speculation transfer tax” and inclusion ofprincipal-residence sales in a lifetime capital-gains tax.
