Government puts 15% tax on foreign house buyers

Written By: - Date published: 7:11 am, August 4th, 2016 - 32 comments
Categories: housing, national, useless - Tags: , , ,

No, not our government, the provincial government of British Columbia:

Vancouver slaps 15% tax on foreign house buyers in effort to cool market

Foreigners looking to purchase a home in Vancouver now face an additional tax of 15%, as Canadian authorities seek to temper a heated housing market that ranks as one of the world’s least affordable.

The tax, which came into effect on Tuesday, will be levied on all home buyers in metro Vancouver who are not Canadian citizens or permanent residents. The measure will also apply to corporations that are not registered in Canada or which are controlled by foreigners.

Announcing the measure, the provincial government of British Columbia said the tax was intended to help cool the city’s red-hot property market, where demand from foreign investors – many of them from China – has helped push the cost of a detached home to C$1.56m ($1.2m) in June, a 39% jump from a year earlier.

“There is evidence now that suggests that very wealthy foreign buyers have raised the price, the overall price of housing for people in British Columbia,” Christy Clark, the province’s premier, told reporters recently. …

More background here. Hmmmm.

In related news, we just passed another one of those milestones that seem to be coming so rapidly lately:

House values hit $600k across NZ – Auckland nears $1m

New Zealand house values have just exceeded $600,000 for the first time while Auckland values climbed towards $1 million.

New Quotable Value data out at noon today:
• National NZ average home value now $602,434
• Auckland average home value $992,207
• Hamilton values up fastest: 31.5% since last July
• Christchurch values only up 3.5% annually

House prices are still going up, wages are essentially flat, and our government does nothing but tinker at the edges. Next year, are we going to vote for more of the same?

32 comments on “Government puts 15% tax on foreign house buyers”

  1. Colonial Viper 1

    Zero Hedge reporting Vancouver real estate agents filing thousands of deals in the last days before the tax came into effect.

    And now, a lot of cases of local and foreign buyers walking away from contracts and even deposits, on the expectation prices will fall.

    Court cases over failed contract performance is looming over these lost deals.

    We’ll know in a few weeks if this is the collapse of the Vancouver housing bubble. Triggered, though not caused by, this tax.

    • Ralf Crown 1.1

      In itself nothing new. In the 70s house prices in Vancouver fell drastically, a house for sale for 450,000 could not be sold for 80,000. In Suva, Fiji, houses “worth” 800,000 fell to 100,000 after none of the non-military coups. At the end of these speculation waves there will be a crash, and New Zealand prices of homes need to come down some 75% to be in line with real world values. The last one in the chain letter row pays. Governments should have tackled the problem over 10 years ago, they did not, they profited from it. Change the rules, homes are not to be “investments” for these financial sharks.

    • Nic the NZer 1.2

      I wouldnt read too much into it yet. The news is all fragments and anecdotes via realestate agents so we have little idea what is going on across the market.

      There does seem to be a lot of uncertainty. I am also not clear about the timeline but it seems that China might have used this as an opportunity to crack down on lending (without being seen to have interfered with another countries market).

  2. RedLogix 2

    Expect more of the flood of money to start swilling our way.

    • Draco T Bastard 2.1

      +1

      Probably but I don’t think there will be much pause in Vancouver land sales either.

  3. Sabine 3

    there is also this

    http://www.zerohedge.com/news/2016-06-28/crackdown-begins-chinese-bank-sues-seize-vancouver-real-estate-assets

    According to the Globe and Mail, China CITIC Bank has filed a lawsuit in Canada to try to seize the assets of a Chinese citizen the bank claims took out a $10 million loan in China then fled to Canada.

    In a first of its kind attempt at intercontinental repossession, the bank is looking to seize numerous Vancouver-area homes, valued at at least $7.3-million, along with other assets, according to the lawsuit, which was filed in the Supreme Court of British Columbia in Vancouver on Friday.

    • Colonial Viper 3.1

      Reminds me of the Chinese servo owner here who, with his Kiwi wife, bailed to China after their small business was accidentally advanced a $10M overdraft. That didn’t work for long.

      Prison time.

      • Ralf Crown 3.1.1

        In a way it did actually, they could only retrieve about half of the money. He got three years I think, and will be released after two. About 5 million disappeared. You could say he was paid 2.5 million a year tax free for sitting in a comfortable kiwi prison. I would not mind that myself, with that pay.

    • Ralf Crown 3.2

      You are right there, in China the government has clamped down ruthlessly on speculators who drive up prices of homes, and they are getting tougher. Some speculators flee overseas, because of the soft market and rules. Change the rules New Zealand, start driving down the price so people can afford to live.

  4. save nz 4

    I’m pro a 15% property tax on non NZ citizens or permanent residents and apply to corporations that are not registered in NZ or which are controlled by foreigners living overseas or not working in NZ.

    • Ralf Crown 4.1

      I am pro a 100% tax on speculation profit from home property that is not your own dwelling.

    • Colonial Viper 5.1

      The problem here is that this tax has been implemented right on the cusp of a bubble collapse – and has probably now pushed the whole shoving match over the cliff.

  5. John shears 6

    From the article:-
    “Announcing the measure, the provincial government of British Columbia said the tax was intended to help cool the city’s red-hot property market, where demand from foreign investors – many of them from China – has helped push the cost of a detached home to C$1.56m ($1.2m) in June, a 39% jump from a year earlier.”

    So the Canadians think that Chinese buyers are part of the problem in Vancouver?
    But…. But… when Phil Twyford suggested that was a possible reason for the
    Auckland (and now NZ) heating of our market he was ridiculed by John Key & his supporters and called a racist in as many words.

    I also note that ALL foreign buyers are subject to the tax ,no exceptions for trusts and businesses etc.

    • Colonial Viper 6.1

      it was a racist move by the notably asian-free NZ Labour caucus, approved from the top (Andrew Little and Grant Robertson), and fronted by Twyford.

      And with their ham fisted handling, I’m glad that Labour sunk in the polls immediately thereafter despite Kiwis generally agreeing with the concept that foreign big money buyers are a real problem in the Auckland property market.

      Get that – the public agreed with the general idea but disapproved in polling of how Labour handled the issue.

      Chinese-sounding last names. What a stupid bloody Winston-aping approach.

      Many other ways it could have been done far better, and even get local Asians on side. (Too bad the Labour caucus didn’t have one to front the PR campaign with. Better than have a middle aged white guy keep talking about Chinese sounding last names).

      • Draco T Bastard 6.1.1

        it was a racist move by the notably asian-free NZ Labour caucus

        No it wasn’t as has been explained to you before.

        Chinese-sounding last names. What a stupid bloody Winston-aping approach.

        You work with the data that you’ve got. You can’t work with what you wish you had.

        • Colonial Viper 6.1.1.1

          Yes, let’s have more white people lining up to explain what is racism and what isn’t. Go on.

      • Ad 6.1.2

        +100

      • Ralf Crown 6.1.3

        This has nothing to do with “race”, and remember, even if “Chinese” all look the same to traditional kiwis and have the same passport, they are in fact many different ethnicities. It has everything to do with that China is clamping down very hard on speculation in homes that drive up the prices and New Zealand is encouraging it.

      • North 6.1.4

        That’s your fascination CV…….and bewilderment. Identifying anyone in connection with anything as racist. When really all you’re doing is giving your obssessive bitterness about the Labour Party yet another run. Much as you do about Hilary Clinton. In the process cheerleading for Trump. Talk about taking your eye off the ball.

  6. Pat 7

    “On the other hand, considering the latest data just released from the Real Estate Board of Vancouver, according to which home prices rose 32.6% in July from a year ago, with the average selling price of a single-family detached home in the Greater Vancouver Area rising 38.0% to C$1,578,300, even as the actual number of sales collapsed by 18.9% y/y in July, we have a feeling the local population will be far more excited by the option of finally being able to buy a house at an affordable price, than the consequences of having to nurse what will shortly be a burst housing bubble for the ages.”

    A statement the Labour party may wish to consider…….

    • Nic the NZer 7.1

      A massive supply contraction (anecdotally a 75% drop of for sale houses across a few weeks)? Isnt that supposed to cause a price increase?

      • Pat 7.1.1

        still struggling with that english comprehension Nic… “according to which home prices rose 32.6% in July from a year ago,”….”even as the actual number of sales collapsed by 18.9% y/y in July,”

        a one off 15% tax may not have the desired effect given that it represents less than six months capital gain in the current market but it does signal a willingness on the part of the policy makers to take action to reduce demand and the possibility further measures may be taken.

        as to anecdotes ….

        “[It] seems a bit high to blame on a tax that is only targeting a specific sector of the market,” says Tsur Somerville, the director of the UBC Centre for Urban Economics and Real Estate.

        But Somerville says it is expected that the tax would cause some uncertainty in the market.

        “People who are thinking of buying or thinking there is going to be a drop in prices in response to the tax are waiting to see how that plays out, but I don’t think I would judge a policy entirely on one week’s worth of data.”

        Somerville says he would look at the data for three months before the tax was announced and three months after the tax to see the true effects.’

        like Somerville I think it prudent to wait and see.

        • Nic the NZer 7.1.1.1

          My comprehension is just fine apparantly from your reply.

          Mr Sommerville describes a supply contraction in your highlighted comment,
          “People who are thinking of buying or thinking there is going to be a drop in prices in response to the tax are waiting to see how that plays out”
          This is also described in other places (but its all anecdotal evidence).

          But you have a pet theory saying that price is driven by supply and demand, doesn’t this cause an outcome of a price increase on your theory?

          Apparently not a theory shared by the participants though who are uncertain about the new price level of the market and withdrawing. The question from that being if price actually influences the supply (and demand) what is driving the price then.

          Btw no sales are obviously not a measure of supply or demand themselves.

  7. Draco T Bastard 8

    Vancouver slaps 15% tax on foreign house buyers in effort to cool market

    Yeah, attempt. It won’t work. The only thing that will work and allow a country to start working for their own people again is a complete ban on offshore ownership. Anything less simply isn’t good enough.

    • Garibaldi 8.1

      I agree Draco but I would like to see far stronger controls on local investors as well. Every house they buy is stopping someone worthy. We have to make real estate a neutral investment and thus funnel investment into better things for the future.

  8. fisiani 9

    http://www.radionz.co.nz/news/national/310075/$800k-homes-behind-the-headlines

    So Labour again trying to trick us that houses will cost $800,000 shown to be nonsense. Typical.

    • BM 9.1

      You just can’t trust a word they say.

    • McFlock 9.2

      So property developers out of the kindness of their hearts will not seek to maximise their profits?

      Doesn’t that run counter to your tory belief system – aren’t you supposed to argue that maximising profits will solve everyone’s problems?

    • mikes 9.3

      800k is only 80% of the current average price, I can’t imagine for one second that developers would choose any option other than that which maximizes profit, which is after all, why they are in business.

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