Photo: Harshil Shah/Flickr
This week the BC government released a 30-point housing plan in its 2018 budget to tackle worsening housing affordability in the Lower Mainland. The plan included a five per cent increase to the already existing foreign buyer tax and a new speculation levy. But, Chinese international real estate website, Juwai.com, says targeting overseas buyers will have little impact on the affordability challenges the region is facing.
“Vancouver’s housing boom was born in the halls of the Bank of Canada, where interest rates are set, rather than the streets of Beijing,” says Juwai.com CEO Carrie Law, in an email statement.
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On Tuesday, the NDP government announced the comprehensive housing plan in an effort to create a fairer housing market as house prices continue to soar, particularly in the Lower Mainland.
The plan includes a five per cent increase to Metro Vancouver’s foreign buyer tax, which was introduced in August 2016. As of Wednesday, the tax is now 20 per cent and extends to the Fraser Valley, Central Okanagan and Nanaimo and Capital Regional Districts.
The government also announced a new speculation tax targeting foreign and domestic speculators who don’t pay taxes in the province.
Beginning in fall 2018, the tax will be 0.5 per cent of taxable assessed value for the 2018 tax year and two per cent in the years thereafter. The levy will apply in Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and the municipalities of Kelowna and West Kelowna.
According to Juwai.com’s Law, the new taxes will have a negative impact on overseas buyers. She adds that Chinese buyers want to enter Vancouver’s market because they either work or study there, or want to immigrate there.
“The increased taxes are likely to put further financial pressure on families from overseas who are already stretching their personal savings to the limit to enable a move to Vancouver,” says Law.
She argues that foreign buyers aren’t to blame for BC’s rising prices. Instead, Law points the finger at years of lenient mortgage regulations. She says the new mortgage stress test introduced by the Office of the Superintendent of Financial Institutions (OSFI) on January 1 will have a more substantial impact in addressing BC’s housing affordability crisis.
“The decision by OSFI to hold Canadian mortgage applicants to higher standards will get to the heart of the cause of the property boom, which is cheap and easy credit — especially for investors,” says Law.
Vancouver mortgage professional Sabeena Bubber also believes targeting foreign buyers is not the answer and that these new taxes won’t deter speculation in the province.
“Any pullbacks that we had, we saw when the [foreign buyer tax] tax came into effect in 2016,” Bubber tells BuzzBuzzNews.
She adds that the government should instead focus its energy on tackling the lack of housing supply across the province.
“I personally think the increased demand has to do with a supply issue. We’re dealing with a province that has a growing population and the reason we continue to see the prices [increase] is not necessarily due to foreign demand, it’s just a lack of supply,” says Bubber.