The proportion of foreign buyers in the Vancouver region is at its highest level since the province’s 15-per-cent tax on these purchasers came into effect a year ago, with experts and industry insiders saying international interest is strong in the surging condo market and the suburbs of Burnaby, Richmond and Surrey.
Provincial government data released on Tuesday show foreign buyers accounted for 5 per cent of homes bought in Metro Vancouver in September, with Richmond and Burnaby showing the highest levels, at 10.8 per cent and 9.6 per cent respectively. In Surrey, the city in the region where the most properties changed hands, the rate of foreign buyers more than tripled from August to September – jumping from 1.7 per cent to 5.9 per cent.
Although it is too early to say whether the September data represent a new baseline for the level of foreign buyers in the region, industry insiders and academics say these numbers are likely related to the region’s surging condo prices, which are driving Greater Vancouver’s real estate market in the wake of slowing sales in the once-mighty segment of detached houses.
Alexander Ning, a Vancouver notary who specializes in real estate contracts, said many of his foreign clients have been paying the tax after completing sales of condos they agreed to purchase two to three years ago – long before the levy was created.
“No one had any idea that the provincial government would bring in this foreign-buyers tax,” Mr. Ning said. “So they’re stuck and they’re completing. They seem to think rather than forfeiting the deposit and not complete, they would be losing less by completing.
“I have seen a lot of those. Some of them have purchased multiple units.”
In the year since the levy was introduced on Aug. 2, 2016, the percentage of buyers who were not citizens or permanent residents had hovered around 3 per cent to 4 per cent. Before that tax, brought in by the former Liberal government, such buyers accounted for 13 per cent of purchases in the 22 communities affected by the levy.
Before and after the tax, foreigners were observed buying properties that – on average – were more expensive than those purchased by citizens or permanent residents.
In the city of Vancouver, foreign buyers continued purchasing more expensive homes compared with locals in September, spending an average of $1.7-million versus $1.4-million, the data show.
This was the reverse for the wider region, where $853,260 was the average price paid for properties involving foreign buyers; locals, on average, spent $75,000 more that month.
Joshua Gottlieb, an assistant professor in the University of British Columbia’s Vancouver School of Economics, said this could indicate foreign buyers are increasingly looking toward the less-expensive condo market, as well as suburbs further afield. Still, Richmond and Burnaby will remain popular with Chinese buyers because it is easy to get by without English, according to Syrus Lee, vice-president of the Chinese Real Estate Professionals Association of B.C. Peter Scarrow, counsel for Macdonald Realty who has monitored B.C. real estate trends for 30 years, said his firm’s internal data from the 11 months before and after the tax was implemented showed foreign buyers were involved in roughly the same number of deals during those two distinct periods.
B.C.’s 15-per-cent tax, Vancouver’s 1-per-cent levy on empty homes and China’s increasing constraints on outbound money flows will put pressure on foreign demand for these homes, but not make a major dent, he said. Mr. Scarrow said that’s because of three main factors: Quebec’s investor immigration program funnelling close to 1,000 Chinese families a year to Metro Vancouver; the flow of wealthy international students to the region; and the ease of travelling to a region serviced by direct flights to 10 different cities in China.
“The demand factor in China is as great as it ever was,” said Mr. Scarrow, whose firm has an office in Shanghai.
He said that the affordability issue is extremely complicated for governments to address because it is not the immigration status of the buyers that is significant but the origin of the funds used to purchase homes.
B.C.’s NDP government is still defending the tax against a proposed class-action lawsuit, even though the party criticized the levy while in opposition and has declined to say what it plans to do with it – strengthen enforcement, broaden the tax’s reach or kill it entirely.
Green Party Leader Andrew Weaver said his party is disappointed the NDP has not introduced any legislation to curb unaffordable housing prices and instead has pledged to bring in major changes as part of its spring budget. The Greens, whose three MLAs have agreed to support a minority NDP government, want to double the foreign-buyer tax to 30 per cent and expand it across the entire province.
Former Liberal finance minister Mike de Jong, now an MLA aspiring to become his party’s new leader, said Wednesday that the government can better improve affordability by increasing the supply of new homes rather than focusing on foreign buyers – who only participate in 5 per cent of Metro Vancouver’s tight market.
The article was originally posted on The Globe and Mail, November 1st, 2017. Written by Mike Hager.