Property tax laws in Vancouver and why it is still a great place for investment
Last year July, due to a hot property market that showed no signs of calming down, the provincial government of the British Columbia, slapped a 15% property transfer tax on foreign investors.
The new tax legislation was an attempt to reduce the to cool down a market typified by skyrocketing house prices and worried home buyers. The government believed that the cause of the high cost of housing in Vancouver and Toronto was attributable to the heavy activity of foreign buyers. At the time, some real estate experts believed that influx of bids from Chinese businessmen drove up the demand for high-end Vancouver properties.
Richard Morrison of Turbo Tap said there was evidence that wealthy foreign investors had raised the price of housing for the average resident of British of Columbia. “It was simply a case of high demand and reduced supply. A natural economic force that leapfrogged the cost of real estate,” says Morrison.
The economic significance of the tax
The law which has since been effected will be passed on home buyers in the Vancouver metro police, who are Canadian nationals or permanent residents. It will also affect companies that aren’t registered in Canada or run by foreigners.
Last year in June, the standard price of a detached Vancouver home had increased by 38.7% to almost ? $1.6 million (Canadian dollars) as reported by the Real Estate Board or Greater Vancouver. Going by the new tax, a foreign buyer would have to pay an additional C$240,000.
The province of British Columbia also allowed the City of Vancouver to impose a yearly vacancy tax on some unoccupied residential buildings. Back then the Federal Government helped provide funds that would see an improved property data retrieval and compilation system.
The tax freed up more proceeds to help ease certain expenses for the province as well as reduce risky borrowing.
The effect of the tax on Vancouver’s property market
Since its passing on August 2, 2016, the 15% property tax has had a tremendous impact on Vancouver’s housing sector. It did cool down the heated market and also increased opportunities for local buyers. According to reports, the effects were felt as early as October 28th the same year.
The same report from provincial statistics, showed that the number of foreign investments dropped by 11.9% in September. But more importantly, there was a significant drop in price of housing in Vancouver. By the last week of September, the price of a detached house in Greater Vancouver was C$1.53 million, which was a sharp 16% decline in from its all-time high in January 2016.
Although the market cooled significantly, Vancouver is till the 3rd most expensive city (property-wise) in the world after Hong Kong and Sydney. Toronto, another Canadian City, ranked 13th in the January survey.
Why Vancouver is still one of the best cities to buy real estate
In spite of the government’s tax legislation and other resulting factors, Vancouver remains one of the best cities in Canada to buy a home.
The survey conducted by Money Sense, was carried out on the basis of income potential, continued price growth and a thriving local economy, including affordability. However, while Vancouver had zero points for affordability, it enjoys top performance status as a result of its market strength, economic status and earning potential.
According to the analysis, Vancouver rents in particular have increased up to 23% in the last 5 years and the vacancy rates are reported to be a negligible 0.7%.
Also, included in the study were the best neighbourhoods within Greater Vancouver to buy real estate. North Shore area dominated the list. The analysis listed; amazing amenities, lovely schools and stunning views, as reasons to purchase property. The French International Baccalaureate program in Ecole Cedardale in West Vancouver is one-of-a-kind and receives rave reviews.
Port Moody Centre came second on the list and is the sole district outside the North Shore area to hit the top 5 places in Greater Vancouver. Its commitment to investing in development and the finishing of SkyTrain stop has transformed the area into a highly-sought neighbourhood that provides reasonable balance between lifestyle, house size and commuter distance.
Other promising areas in Metro Vancouver
In another analysis performed by Real Estate Investment Network (REIN), New Westminster is listed as a budding real estate hotspot to look out for in Metro Vancouver. The REIN survey uses factors such as population size and employment growth to forecast increased rental demand, followed by increased property acquisition demand and, lastly, increased value in properties.
New Westminster’s constant labour force participation in development is backed by 3 major employers in the area; The Port of Vancouver, Translink and Royal Columbian Hospital. Other important factors include the city’s transit connexions and highway infrastructure.
So, if you are a foreigner in the market for a Vancouver home, despite the initial 15% tax, you’ll benefit greatly from a host of accompanying benefits. For one, you likely sell off immediately as vacancy rate (0.7%) is low, and the sustained increase in rental value is another important factor.