In North America’s biggest cities, skyrocketing property values have led to a surge of home purchases from wealthy foreign buyers. But while this real estate boom is a blessing for savvy investors, locals looking to buy a home are increasingly confronted with an inaccessible market. For instance, the average cost of a detached house in British Columbia, Canada, rose to $1.2 million in June, representing a 39 percent increase from the year before. “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,” said the province’s premier Christy Clark.
A study found that foreigners invested more than $1 billion in the region with most of that money going to Vancouver, the province’s biggest city. With a median household income of $76,000 annually, nine out of 10 detached homes in Vancouver currently cost more than $1 million. This disparity brought local officials into action: as of Tuesday foreign buyers now face a 15 percent tax if they want to purchase property in the area. Along with all non-citizens or temporary residents, the law also applies to corporations that are not headquartered in Canada. “Ultimately, the goal is to affect the demand by making sure it’s maybe a little tougher for foreign buyers to find their way into our market,” said Clark.
Vancouver’s property reforms are similar to ones imposed by Singapore and Hong Kong, cities that have faced off with foreign buyers for years. Still, some critics fear that the tax increase will lead to problems for the Canadian metropolis in the near future. First of all, the law depends on foreign buyers disclosing their nationalities to proper authorities. Offshore investors could potentially create a loophole around this rule by having Canadian friends make home purchases for them. Additionally, the law will likely affect foreign nationals who aren’t fabulously wealthy real estate tycoons by pricing them out of a market they already can’t afford. If all goes to plan, though, experts predict that Vancouver home values will drop by 10 percent.
- Will Vancouver’s new tax law discourage foreign companies from doing business in the region?
- Why didn’t Vancouver officials raise taxes on all wealthy homebuyers rather than just foreign ones?