September 23, 2016

Success! Those seeking to reduce foreign, especially Chinese, buying of Vancouver’s real estate are celebrating the latest set of data showing their hard work is paying off.

Foreigners bought only 60 properties to account for a mere 0.7% of all Metro Vancouver sales in August, down sharply from the historical norm of 5% to 10%, said the British Columbia (BC) government. The plunge in foreign buying can be attributed to the province’s shock decision to impose a 15% tax on foreign buyers from August 2.

Premier Christy Clark told the CBC that she was pleased by the result as it was what her BC Liberal Party government had hoped for. The government had been under pressure from prominent voices like the opposition NDP, SFU academic Josh Gordon, the Housing Action for Local Taxpayers (HALT), and the mainstream media, to act against the foreign buyers they blame for making Vancouver housing unaffordable to local residents.

On its Facebook, HALT said the latest data proved that “foreign capital is the root cause of our affordability crisis” and the region’s real estate “is now the nesting ground for super-wealthy foreigners” to speculate or hide their money.

Yesterday, the BC Finance Ministry released data showing the sharp contrast in the number and value of foreign-buyer transactions before and after the August 2 tax.

From June 10 to August 31, the ministry said foreign nationals bought 2,046 Metro Vancouver properties to account for 9.3% of the region’s nearly 22,000 transactions. These foreigners, mostly Chinese, paid a total of C$237 million or 11.5% of the C$20.6 billion worth of real estate sales in Metro Vancouver over that period.

The vast majority of the deals — 1,974 transactions worth a total of C$190.1 million — was completed before the August 2 tax. But once it came into effect, foreigners purchased only 60 properties worth a total of C$46.9 million.

“These transactions raised approximately $2.5 million in additional property transfer tax revenue,” said the Finance Ministry statement.

The ministry did not provide an estimate how many foreigners decided to forfeit their deposits to avoid paying the 15% tax. Another unknown is the number of transactions that were cancelled and the size of the revenue lost to the BC government and the economy.

The biggest question, of course, would be the broader and longer term impact this tax would have on the BC economy. The affordability campaigners have not discussed the potential loss.

Further weighing on the province, several affected foreign buyers have banded together to file a class-action lawsuit against the BC government for the tax’s alleged breach of some 32 international treaties with several foreign governments.

For now, however, most Vancouverites (and Canadians) support the tax, judging from online comments criticising Chinese national Jing Li for launching the lawsuit.

“Go back to China,” reader Chris Rana commented on the Huffington Post story about the lawsuit. “The people of Canada are sick of this BS.”

“She’s not even a permanent resident much less a citizen. This is what the tax is designed to do, stop trying to put a humanitarian spin on some rich foreign investors driving up our housing market,” wrote another reader, Christopher William Loyst.