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Analyzing the True Impacts of the Foreign Buyers’ Tax One Year Later
In October 2016, British Columbia introduced a new real estate policy: the foreign buyers’ tax, which added on 15% more tax for home purchasers from out of country. In April 2017, the Province of Ontario followed suit with the Ontario foreign buyers’ tax.
But more than one year later, many are asking the question — has the B.C. foreign buyers’ tax and Ontario’s levy had the intended impact?
In October 2017, CBC News British Columbia reported that home sales and average prices rose in B.C. in September. A total of 8,340 residential unit sales were recorded during the month, an overall increase of 9.9% from the previous year.
Total sales amounted to $5.8 billion — up 30.2% from September 2016 — and the average residential house price was $693,774 — up 18.5%.
Despite September’s success, however, 2017’s numbers were overall smaller than 2016 in B.C. Residential sales were down 12.8% to $57.6 billion and residential unit sales decreased by 13% to 81,608 units. The average price was down 0.2% to $705,501.
Foreign buying was also down in Toronto, according to The Globe and Mail. Out-of-country buyers accounted for 7.2% of sales in May but only 5.6% of homes sold over the three months ending in August.
The period also included interest rate increases from the Bank of Canada.
The Ontario government has taken the number drop as a sign of the tax’s success.
“The measures that we introduced as a part of the Fair Housing Plan are working,” Ontario Finance Minister Charles Sousa said in a statement to The Globe and Mail. “We are seeing increased housing supply and evidence that more people are finding affordable homes.”
Some reports, however, state that home purchasers are finding ways around the foreign buyers’ tax.
The Globe and Mail conducted an analysis of the tax’s effect in B.C. in October 2017. What they found is that in many cases, buyers were using loopholes to get around even paying it. Some out-of-country buyers purchased under the names of Canadian friends and family members. Among the 50 most expensive properties in Vancouver, the Globe found that two were owned by students and three were co-owned by a student and a “housewife” or “businesswoman” as noted on the property title.
Another way the Globe found purchasers were avoiding the tax was by posting ads online looking for a “legal partnership,” that was actually a legal grey area.
The Globe report also found that before the B.C. foreign buyers’ tax was implemented, out-of-country buyers accounted for about 10% of sales in the Vancouver area. After the tax was set, that number dropped to 0%. It has since come back around, to about 3%.
In October, the B.C. government officially approved a developer’s rent-to-own program that could help foreign buyers get around paying the tax, as reported by CBC News.
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