January 30, 2017
B.C. Softens Rules on Foreign Buyer Tax
Seven months after introducing a controversial foreign buyer tax on Metro Vancouver real estate, the British Columbia government has made an amendment to exempt those with permits to work in province via the B.C. Provincial Nominee Program.
UPDATE: Those who purchased a principal residence on or following August 2, 2016 are eligible for a retroactive foreign tax exemption. Foreign nationals who become a Canadian citizen or permanent resident within one year of their principal residence purchase will also receive a rebate.
To be eligible, they must live in the property as their principal residence for one year. They can apply for a refund starting on Aug. 2, 2017—one year after the tax took effect.
B.C. Premier Christy Clarke announced the amendment to the tax to reporters on Sunday, stating, “We believe the best and the brightest should be able to come to British Columbia. We’re going to lift the foreign owners’ tax on people who have work permits, who are paying taxes and living in British Columbia, as a way to encourage more people to come.”
Re-Opening the Door to Foreign Workers
While it’s not clear if the province’s decision is related to the uproarious global response to U.S. President Donald Trumps’ immigration ban, Clarke released the news after media questioning, emphasizing the amendment is in attempts to draw skilled workers to the province; while the tax was designed to discourage foreign speculative buying of British Columbia real estate, it has had consequences for businesses trying to recruit foreign talent.
However, the change may be too little too late according to NDP housing critic David Eby, who stated to the Globe and Mail, “The weird thing was we were taxing the workers who wanted to come and build our province and we weren’t taxing all the speculators who got their money into the market before the foreign buyer tax was proposed.”
A Controversial Measure
The 15% levy was introduced without warning on the 2016 August long weekend, shocking buyers and market-watchers alike. In addition to halting the purchasing plans of out-of-country buyers, it also threw many sellers with pending sales into legal purgatory, as buyers backed out last minute. The abruptness of the tax, and the fact that it did not grandfather in closing deals, drew strong criticism from industry insiders and consumers.
However, while initially deemed a controversial measure, supporters say it is now having the desired effect, with sales and prices calming slightly in the second half of the year, according to the Real Estate Board of Greater Vancouver. The MLS Home Price Index for Metro Vancouver ended the year at $897,600 – a 2.2% six-month decrease. Residential sales plunged 39.4% year over year, and 22.6% from November to December, due both to foreign buyers passing on the market and domestic ones waiting out the immediate impact.
“As prices rose in the first half of the year, public debate waged about what was fuelling demand and what should be done to stop it,” said REBGV President Dan Morrison in the board’s year-end report. “This led to multiple government interventions into the market. The long-term effects of these actions won’t be fully understood for some time.”