Controversial Vancouver real estate tax targets foreign buyers

Global Business

Controversial Vancouver real estate tax targets foreign buyers 2

Vancouver has consistently been listed as one of the world’s most expensive cities, mainly because of its skyrocketing real estate prices. It’s also been a top destination for foreign capital-largely Chinese. Many residents blame rising prices on foreigners. In a bid to cool things down the city recently enacted a controversial real estate tax that targets foreign buyers.

CCTV America’s Karina Huber has more.

Controversial Vancouver real estate tax targets foreign buyers

Controversial Vancouver real estate tax targets foreign buyers

Vancouver has consistently been listed as one of the world’s most expensive cities, mainly because of its skyrocketing real estate prices. It’s also been a top destination for foreign capital-largely Chinese. Many residents blame rising prices on foreigners. In a bid to cool things down the city recently enacted a controversial real estate tax that targets foreign buyers. CCTV America’s Karina Huber has more.

Vancouver real estate agent Clarence Debelle shows a multi-million dollar house in West Vancouver. He expects an offer from a Chinese buyer.

That’s because many of the high-end homes Debelle represents have been sold to Chinese clients. He said the current wave of Chinese buyers entered the market in 2011, a year after Vancouver hosted the winter Olympics.

“There were Chinese buyers and cars, knocking on doors, buying this, buying that. Everyone in the market sales doubled that year,” Debelle said.

According to the Real Estate Board of Greater Vancouver, the benchmark price for a home in this area rose 63 percent from January 2011 to July 2016.

City officials have been concerned about local residents getting priced out of the market. In an effort to cool things down, the provincial government enacted a new tax on August 2nd that targets foreign buyers. They now have to pay an extra 15 percent for real estate purchases.

The tax was favored by roughly 90 percent of the local population before it was enacted, but many aren’t happy with how it’s been implemented. Existing contracts were not grandfathered in. As a result many prospective buyers have pulled out of deals, despite potentially losing their deposits. And sellers who committed to other homes now find themselves in a tricky position.

Debelle said his business is booming.

“It was an egregious abuse of political power to not grandfather past transactions. Since the new tax, my business has increased. I’ve had more showings and more deals that I had than in the previous eight to ten weeks. There are a large percentage of Chinese buyers who are okay with paying a 15 percent tax. For them it’s the cost of just purchasing a property in Canada,” Debelle said.

But other agents like Steve Saretsky who specializes on more moderately priced downtown condominiums is feeling the effects of the tax.

“As soon as the tax came out it really put a screeching halt on things. Everyone said ‘oh whoa.’ Maybe this will potentially take out a huge part of the market with foreign buyers. Maybe we should wait. There’s just so much uncertainty right now so I think a lot of locals temporarily at least stepped away,” Saretsky said.

The market started cooling earlier this year, and the tax hasn’t helped.

Agents have reported a drop in the number of transactions. They also said there are fewer bidding wars and the Real Estate Board of Greater Vancouver said homes are staying on the market for longer duration of time. But, how about prices?

“Even though the number of sales has dropped, we haven’t seen prices come down yet. Now the new tax has created a lot of uncertainty and everyone is saying has this affected prices. The truth is we don’t know yet,” Real Estate Board of Greater Vancouver President Dan Morrison said.