The province of British Columbia shocked the real estate market last week by slapping a 15% additional land transfer tax on property in the province bought by foreign buyers.
What made the move especially surprising is most observers of the sector continually point out foreign money just doesn’t matter that much. One recent report indicated buyers from outside of the country were only responsible for 3% of all sales.
Housing bears, however, dispute this number.
Still, it was obvious the move is popular politically, as thousands of frustrated wannabe homeowners see a market that’s steadily climbing more and more out of their reach. This new law will hopefully help make property more affordable.
Many folks who closely follow the market think this new tax won’t matter one bit.
There are several reasons why. The first is an additional 15% tax doesn’t mean much to a millionaire who just cares about getting capital out of China. For these people, capital appreciation is just a bonus. The important part is owning assets in a stable economy like Canada’s.
Secondly, much of the cash used to buy properties is funneled through relatives and friends who are already in Canada. Foreign ownership rules don’t apply to immigrants who are already permanent residents or citizens.
And finally, Vancouver has a long way to go to be affordable. The average price of a detached house is well over $1 million, while median family income is less than $80,000. Vancouver would have to experience an epic crash for the market to be deemed affordable.
