The hottest real estate market in Canada is on the west coast in Vancouver BC, and its surrounding lower mainland.
Real estate prices have been rising astronomically there for more than a decade and a half, making home ownership less realistic for a growing number of the local population. And it’s certainly a fact that metro Vancouver has seen many foreign real estate investors swoop in and buy up multiple properties that are used as investment vehicles.
In doing so, both the local rental and real estate market has skyrocketed. The numbers back up this story: the provincial government reports that between June 10 and July 14 of this year, foreign nationals spent more than C$1 billion (Dh2.8 billion) on properties in BC, the majority of which centred around Vancouver and its suburbs.
So what is the province to do? Well, they decided they had to do something. And they decided drastic measures were required.
And recently the provincial government introduced measures to curb non-Canadians and non-residents from further driving up prices by introducing a new foreign buyers tax for residential real estate.
Starting this August, foreign nationals now must pay an extra 15 per cent tax on any property they wish to purchase in metro Vancouver. The tax applies to any non-resident and/or non-Canadian and is in excess of other taxes all buyers pay.
The tax is meant to support lower cost housing, rental and support programmes for low-income and middle-class citizens struggling with the local real estate and rental market. The new legislation also brings with it the ability to levy a vacancy tax in the city of Vancouver for condo suites and residential homes that are deliberately kept without residents.
But is this measure a good idea and will Ontario follow suit?
The new tax has only just come into effect- August 2 to be precise- so it’s too soon to say if it will be effective and exactly who it will effect. But, anecdotally, real estate agents are reporting many failed deals as potential buyers walked away from purchases that would be effected by the new tax.
Many are also reporting that residents have delayed their own house-hunting to see if the market cools in the coming weeks and months. It’s going to take some times to tease out all of these variables and to get a good sense of how this is playing out.
Rumblings here in Ontario have already begun about the introduction of similar measures. Toronto, Missisauga, Oakville and Hamilton have all seen sustained and extraordinary increases in real estate value that isn’t likely to stop any time soon.
I think BC’s tax measure is extreme, and believe it is likely to effect middle-class foreigners in Vancouver on work visas, interested in creating a long-term life here in Canada. That’s my hunch.
So, for now, the Toronto and surrounding areas remain a very strong bet. In fact I am seeing increased interest from high net worth clients from all over the world choosing now to pull the trigger and buy. Not only are they enriching their portfolios, it’s smart to avoid any additional taxes should similar measures be implemented in Ontario shortly too.
The writer is Director at Buttonwood Property Management.