Be careful what you wish for, you may get it. An old expression describing unintended consequences.
For years now there have been reports from the field, from university professors, real estate companies who deal with offshore buyers that there is a tsunami of foreign money pouring into Vancouver real estate and driving up prices, lowering inventory and leaving homes empty. As late as May the provincial government was denying the problem. Eventually public pressure forced them to investigate.
Vancouver by Blok 70
They discovered that between June 10 and July 14 10% of the buyers were offshore, mainly Chinese who purchased $885 million worth of real estate in that period. A great idea in the mind of the Premier was born: We can collect large sums of money from non-voters to spend on demanded housing programs by actual voters. This required action and a 15% tax on house or condo purchases by those who were not official Permanent Residents or Canadian citizens was announced in the Legislature. Eight days notice was given before enactment.
Some of the fallout includes:
1. The government refuses to grandfather sales that were entered into before the tax was announced so it will continue to apply to every closing after August 2nd.
2. Many local sellers who acted in good faith are being told by their realtors, lawyers and notaries that the foreign buyer is refusing to close. Many transactions down the line are in jeopardy. Buyers are demanding that the seller pay the tax to complete the transaction.
3. Developers are concerned that up to 3,000 pre-sale contracts won’t be honoured by buyers who purchased condos from the plans where the buildings aren’t built yet. Developers are worried that their bank financing which depends on a 70% level of pre-sales could be in jeopardy.
4. A prominent realtor who put up on his website ways to avoid paying the tax by transferring the contract to a Canadian friend or relative is now being disciplined by the Real Estate Council.
5. There is concern that buying will spike in areas and cities outside Metro Vancouver including Whistler, Kelowna, Victoria and South Surrey.
6. Investment buyers are now looking at Toronto real estate.
7. Ontario is looking to enacting a tax in the Greater Toronto Area to raise much needed cash and to slow offshore money pouring into their market.