On August 2nd, B.C.’s new foreign property tax laws came into effect and the end of last week saw a record 15,000 property transfer applications. Friday saw more than 9,200 transactions filed which broke the 2007/08 record of more than 8,400 in a day. Thursday also reported over 5,800 transactions which totaled close to the amount registered for the entire month of April.
Now as days have passed, real estate boards and brokers in BC are reporting through as foreign buyers are backing out of the deals and forfeiting deposits on firm deals rather than paying the newly implemented 15% tax for purchases made in Metro Vancouver. Also affected are local buyers who are withdrawing offers in expectation that the market will soften.
Local real estate agents are seeing cases where foreign buyers unable to rearrange previously negotiated closing dates and choosing to simply walk away.
The next chapter in this will be the number of court cases for sellers trying to obtain the deposit out of trust or even suing the buyer for damages or even trying to get them to complete.
Not all foreign buyers are wealthy. Most are there on a work visa or working towards a landed immigrant status. Most are considered middle to upper income professionals and make up 3-5% of the sales each year.
The tax law also did not take into account any long term contracts, pre-sale agreements for housing under construction or already pending property purchases. All transactions for foreign buyers processed after the date will be taxed at 15% with only 8 days notice given. Buyers in Vancouver will also see an increase in the property transfer tax.
The new tax laws implemented by the government aim to make housing more affordable for middle class buyers. Last month, the benchmark price for detached properties rose to over $1.5 million in Vancouver.
This tax may shift foreign buyers to other markets such as Saskatoon as foreigners look to invest in new markets. Not all buyers will be specific to BC and are indifferent to where they are purchasing. Hopefully Saskatoon will benefit from these buyers and with a strong economy, I believe Saskatoon is a great choice for all buyers.
Saskatoon real estate agent
Century 21 Fusion