10 ms·

Foreign residential property buyers to be taxed at 15% in Vancouver

89 points by dotch 10y ago

adaml_623 10y ago
What's the reason for this? Is it because it's bad for real estate in a living city to be used as an investment vehicle?
- zdkl 10y ago
  ...as the article states... Foreign investors drive up costs for locals. Locals unhappy, add tax for foreign investors. Foreign investors potentially wronged because of various agreements Canada has joined limiting protectionist actions like these. Or read the article, that'll answer your question.
- bluedino 10y ago
  It's free money, and it looks really good as protecting local interests. A Chinese or Russian millionaire looking to buy property in Vancouver is going to buy whether it's $5 million or $5.75 million
  - newacct23 10y ago
    >A Chinese or Russian millionaire looking to buy property in Vancouver is going to buy whether it's $5 million or $5.75 million I don't know why you believe this to be true but it isnt
- ZeroGravitas 10y ago
  Property ownership is often subsidized, maybe they feel this is just rebalancing the subsidy for the people they don't want to subsidize? (Just a guess, I don't actually know)
goatherders 10y ago
There is nowhere for people to live that is affordable and it's hurting the economy (particularly tech). Young people are commuting up to 2 hours each way to work while tons of condos sit vacant as foreigners park their cash in the market. Even those wanting to buy with traditional financing are losing out to all-cash buyers above asking.
- MichaelBurge 10y ago
  Why don't they hire a property management company to rent it out? Whatever's preventing that sounds like the real problem here.
  - doc_holliday 10y ago
    Well because the property is extremely overpriced when you consider market rate rents the yields are extremely low. You can only charge as much rent as the market will bear, which in some ways makes rental completely different to ownership prices. Basically the people buying it don't deam the return on renting it worth the risk of a bad tenant or worth the hassle. They don't need cashflow, are either using it as a safe holding of value or as a quick escape property if they need to leave insert country here for political reasons. It's happening the world over.
    - lintiness 10y ago
      sounds like you guys should dump as many of these properties on these fool heads as possible. you can buy them back in a few years for a lot less.
      - saosebastiao 10y ago
        Exactly what came to my mind. I saw this same behavior happening in 2005. When there is no marketable cash-flow producing use of investment property, you are in a bubble.
        10y ago
skizm 10y ago
LLC with one Canadian involved gets around this I believe.
- tantalor 10y ago
  AKA tax evasion
  - roel_v 10y ago
    Only in a tax system with 'taxee had to prove good faith' basic rules, which luckily aren't that common.
  - CalRobert 10y ago
    More avoidance than evasion, really. It's not _against_ the law, even if it's not liked.
- _delirium 10y ago
  The usual skirt around a lot of real-estate law. Also a common way people (and companies) avoid triggering a revaluation for California Prop-13 purposes when selling property: the property is owned by a holding company, and people buy and sell stakes in the holding company, being careful to never buy/sell a >50% stake in any individual transaction. (The latter part is because California does make an effort to close this loophole: sales of a majority stake in an LLC imply the property it owns has changed hands. But then people just never do that, sometimes aoviding it in fairly brazen ways, e.g. Michael Dell bought a holding company without buying more than 50% of it by splitting the purchase between himself, his wife, and one of his business partners: http://www.santamonicadispatch.com/2013/05/prop-13-gives-edge-to-dell/ http://www.santamonicadispatch.com/2013/05/prop-13-gives-edg...).
caffodian 10y ago
Vancouver is currently a mess of low interest rates, FOMO, foreign buyers, and supply issues. Due to both the city & BC government having a large number of developer donors, it's also a very partisan issue. For the longest time, the ruling provincial party was of the opinion that this was not a problem and high property prices was due to the strong economy (circular logic, as real estate & construction are the drivers of that.) They were getting pretty hammered in polls. On top of that, they cited a ~5% ish foreign purchaser number based on 19 days of data, only to then bump it to 10% conveniently on the release of new data a day or two after introducing this 15% tax...so yea. It's a disaster.
nathanvanfleet 10y ago
I live in Canada and basically Vancouver, possibly the Canadian city with the nicest weather, is completely cut off to me. It's not even like Silicon Valley etc where there is an industry and you can find a job that pays better here, it's just completely too expensive. There was a website called something like "crack house or million dollar Vancouver home" because knock-down quality bungalows were selling for over a million dollars there.
- deanCommie 10y ago
  You could rent. Rental prices in Vancouver are fairly reasonable relative to purchase prices.
  - caffodian 10y ago
    The rental market has begun heating up lately (stories of rental auctions, renovictions, evictions for airBnB, etc) so although they may be comparatively reasonable, they may not stay absolutely reasonable for long.
  - feklar 10y ago
    0.8% vacancy rate, good luck renting also landlords all use fix term year leases now where you agree to move after it expires in order to bypass the provincial rent increase cap and raise your rent +30% https://www.biv.com/article/2016/6/tight-rental-market-bc-landlords-dodge-rent-laws-f/ https://www.biv.com/article/2016/6/tight-rental-market-bc-la...
    - goatforce5 10y ago
      FWIW, pre-agreed termination agreements like this are void in Ontario. I suppose it's to avoid exactly the situation you describe. http://www.ontariotenants.ca/law/act05.phtml http://www.ontariotenants.ca/law/act05.phtml
      - hackerboos 10y ago
        Ontario's rental laws are great compared to other provinces with the exception of maybe Quebec. Once you sign a lease you and roll on month-to-month it's unlikely you will be evicted. Landlords either need to sell the property or move into it themselves to get the property back.
inanutshellus 10y ago
FWIW, this is a repost from 7 days ago: https://news.ycombinator.com/item?id=12212981 https://news.ycombinator.com/item?id=12212981
randomgyatwork 10y ago
I like how this article frames it as an issue about the 'free movement of capital.' In a lot of instances 'free-trade' agreements exist to help the mega-rich, this seems like a perfect example.
- ab5tract 10y ago
  Critical analysis of neoliberal economics is not likely to be found in the pages of one of its primary mouthpieces, though sometimes the Economist does surprise and actually mentions an externality or two.
  - inopinatus 10y ago
    I think this is an unfair generalisation. The Economist has always had free-market leanings, long before the term "neo-liberal" was spawned. Moreover even a cursory glance at their comments feeds (you'll need a strong stomach of course) reveals an equal quantity of complaining about this "leftist organ" and its "socialist liberal agenda" as there is about being a "trade agreement apologist" or "capitalist rag". It may be the only way to gauge impartiality is when everyone is equally offended.
  - hx87 10y ago
    The Economist is classically liberal, not neoliberal--they're too hostile to monopolies, oligopolies and rent-seeking to be the latter.
- SmellTheGlove 10y ago
  No way man. This means you're free to buy up real estate in all of those desirable Chinese cities. Go on. Invest.
overcast 10y ago
Wonder if San Francisco could do the same to these foreign real estate squatters.
- feklar 10y ago
  The tax only really affects landed immigrants who live and work in BC, and foreign capital investments in new developments as the Chinese speculators with billions who want to park money in Vancouver have already found ways around it because they can deposit millions to set up national corporations and have it do all the land holding/flipping. For example my sister who has lived here 30yrs with American citizenship will have to move to another province or back to the US if she sells her house since she will be eligible for the 15% tax buying a new place, on top of all the other existing taxes so is looking at +20% tax when her family outgrows their home.
  - PakG1 10y ago
    My brother is a real estate agent in Vancouver. He is really upset at this law because precisely this. He predicted before the law passed that the ones who will suffer most from this tax will surely be honest immigrants. He says that the law doesn't close the right holes to protect the right people, and it certainly doesn't deal with the supply-side issues, only the demand-side.
  - querulous 10y ago
    the tax doesn't apply to permanent residents. just resident temporary foreign workers and non-residents
  - allengeorge 10y ago
    If she's a PR then the tax doesn't apply...
  - goatforce5 10y ago
    re: setting up Canadian corporations with foreign money > The release defines foreign corporations as companies "not incorporated in Canada or, incorporated in Canada, but controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange." It remains to be seen how much effort will go in to enforcement re: determining the ultimate ownership of companies investing in Vancouver real estate. > According to a release, the government defines a foreign national as someone who is not a Canadian citizen or permanent resident, "including stateless persons." Presumably your sister has permanent resident status and is exempt from the new tax because of that. http://www.cbc.ca/news/canada/british-columbia/metro-vancouver-home-sales-foreign-buyers-tax-1.3694167 http://www.cbc.ca/news/canada/british-columbia/metro-vancouv...
astazangasta 10y ago
I have been upset by how quickly many people have concluded that the problem in San Francisco (et al) is something something supply/demand and not about speculation, and that the solution is to open up zoning laws and allow new development. The existence of enormous wealth inequality means a few billionaires can easily scoop up all the available property on the market in San Francisco, and thus the housing price is extremely vulnerable to speculation. Since land is the most valuable thing you can own, and thus the most lucrative thing to speculate on, I am sure this is happening. Here http://voxeu.org/sites/default/files/schularick_fig1.png http://voxeu.org/sites/default/files/schularick_fig1.png is a figure from a recent paper showing a dramatic rise in the price of housing since 2000. The authors of this paper again conclude that something about movement or building or zoning needs to change. I disagree. To me it is obvious that this shift after 2000 is the result of speculation. Specifically, we know that the Commodity Futures Modernization Act of 2000 opened up a vast new derivatives market in the hundreds of trillions of dollars. This market contributed to a series of enormous bubbles and speculative bursts - e.g. the energy market speculation that Enron caused, and later the housing bubble that destroyed the global economy, still ongoing. It seems obvious to me that the sudden and dramatic rise in land price is at least partially, and probably mostly, related mostly to derivatives and speculation. We didn't change much since 2008 - it stands to reason this would still be ongoing. It is also my belief that the recent push to "build build build" and "rezone" in SF is a result of this speculative putsch, which wants new and valuable property in SF to make good on the bubble of speculation. Since this bubble is driven by billionaires in tight markets (not poor people being given fraudulent mortgages nationwide), it's probably harder to see and pop. But I really, really wish people were paying attention to this more. We haven't learned the lesson of 2008 - things have changed, and not for the better.
sergers 10y ago
A move by local government to drum up votes for upcoming election. Make it look like we doing something, at the same time raising additional budget with the tax surplus. I think it's too little very late. 15%tax on illicit funds is just cost of doing business ( with says around it too). Quote from a localasian realtor to me: "now my client can't buy the 9million dollar house he wanted for investment cause of tax." in one scenario
- kennywinker 10y ago
  Damn right it looks that way! My uncle, a Vancouver real estate agent, was talking about how the market had all but halted it's growth just a few months before this change was announced. I'm not informed enough to know for sure, but I'd guess this is the provincial government trying to take credit for that slowdown after the fact.
velodrome 10y ago
The Canadian housing market is currently in a bubble. The same can be said about the Australian housing market. Canada http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-CHART-570.jpg?4 http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-... http://static5.businessinsider.com/image/54aea0136da8118f2ae2093d-986-726/screen%20shot%202015-01-08%20at%2010.14.22%20am.png http://static5.businessinsider.com/image/54aea0136da8118f2ae... Australia https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAACA8/XD2HC6aV-Qk/s1600/Australia%2BHouse%2BPrice%2BIndex%2Bvs%2BInflation.jpg https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAAC... http://www.propertyobserver.com.au/images/stories/keenjan2.png http://www.propertyobserver.com.au/images/stories/keenjan2.p...
- hellogoodbyeeee 10y ago
  A bubble is a more complex phenomenon than large price increases. A bubble is inflated by speculation that isn't rooted in anything except the rising price. If rich foreigners are buying property to summer in because they like the weather, then not a bubble. If rich foreigners are buying property because the property has gained X% in price every year for the last ten years but they don't know anything about the specifics of the local real estate market, then more likely a bubble. You also can't say something is a bubble until after it pops.
  - skylan_q 10y ago
    A bubble is inflated by speculation that isn't rooted in anything except the rising price. It's been like that for the last 8+ years.
    - vinceguidry 10y ago
      Hence the reason for the second rule. You don't know what they're propped up on until they disappear.
    - hellogoodbyeeee 10y ago
      You are trivializing how difficult it is to determine this. For example, is the empty mansion empty because someone is speculating with it or because a globe trotting billionaire forgot he bought it? I'm sure there is speculation going on in the market, but we can't tell to what degree without polling the people buying real estate.
Tiktaalik 10y ago
I'm generally in favour of this policy, though it's a bit half baked, and it is too little, too late. It was probably only implemented because the government had done nothing on the file, is coming into an election, and realized they were going to get thrown out by an angry electorate. In a lot of ways Vancouver has been ruined by the housing bubble and influx of speculative foreign capital. Extremely high house prices have created a strong incentive for anyone who can easily work elsewhere (ie. a tech worker) to move away. Many of my friends have drifted away to Seattle and SF. The only way houses could become even slightly affordable at this point would be a housing crash. This would be disastrous to the local economy, which has become entirely built on selling housing to one another. Accordingly it's hard to wish for that.
jpollock 10y ago
The last paragraph indicates the precise problem with this policy - it isn't adhering to the terms of the free trade agreements that Canada has signed - both NAFTA and the "China Foreign Investment Promotion and Protection Agreement" require that offshore investors be treated the same as onshore. The CFIPPA [1] is clear on the subject: 1. Each Contracting Party shall accord to investors of the other Contracting Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the expansion, management, conduct, operation and sale or other disposition of investments in its territory. Perhaps the claim is that the initial purchase of the asset is what's being taxed, which might be seen as exempt? [1] http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/china-text-chine.aspx?lang=eng http://www.international.gc.ca/trade-agreements-accords-comm...
- pesfandiar 10y ago
  I don't know much about the legal aspects of international agreements like that, but is real estate considered an investment vehicle like e.g. bonds and stocks? You'd think there should be some exceptions, since real estate is enabling local communities, and you know, provides shelter for people to live in.
  - skylan_q 10y ago
    Vancouver is tight and they aren't building/aren't allowing more building in the immediate area. Housing is for people to live in, but far too many have been speculating.
    - EnFinlay 10y ago
      There is a lot of building happening in Vancouver right now, mainly housing blocks being turned into high rises.
- SmellTheGlove 10y ago
  Forgive me because I don't know how to blockquote here, this is the definition of "investment" from the agreement you linked: 1. “investment” means: (a) an enterprise; (b) shares, stocks and other forms of equity participation in an enterprise; (c) bonds, debentures, and other debt instruments of an enterprise; (d) a loan to an enterprise (i) where the enterprise is an affiliate of the investor, or (ii) where the original maturity of the loan is at least three years; (e) notwithstanding sub-paragraphs (c) and (d) above, a loan to or debt security issued by a financial institution is an investment only where the loan or debt security is treated as regulatory capital by the Contracting Party in whose territory the financial institution is located; (f) an interest in an enterprise that entitles the owner to share in the income or profits of the enterprise; (g) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution; (h) interests arising from the commitment of capital or other resources in the territory of a Contracting Party to economic activity in such territory, such as under (i) contracts involving the presence of an investor’s property in the territory of the Contracting Party, including turnkey or construction contracts, or concessions to search for and extract oil and other natural resources, or (ii) contracts where remuneration depends substantially on the production, revenue or profits of an enterprise; (i) intellectual property rights; and (j) any other tangible or intangible, moveable or immovable, property and related property rights acquired or used for business purposes; but “investment” does not mean: (k) claims to money that arise solely from (i) commercial contracts for the sale of goods or services, or (ii) the extension of credit in connection with a commercial transaction, such as trade financing, other than a loan covered by sub-paragraph (d); or (l) any other claims to money, that do not involve the kinds of interests set out in sub-paragraphs (a) to (j); I'm not an expert on Canadian law, but in the US at least, that definition does not appear to me as though it would cover real property. Property itself refers to chattel, and real property would need to be expressly included. So I'm not sure that they have a problem, as real property doesn't fall under the ordinary definition of an investment, and it's not encompassed in the agreement definition of investment above. Disclaimer: I'm not your lawyer. I know nothing about Canadian law. I am a dog pretending to be a lawyer on the internet.
skylan_q 10y ago
This tax won't do much to impact the market directly as foreign capital makes up about 4-8% of the purchase activity, which is elevated but not outrageous. Foreign funds also buy at the same average price as local funds so it's not about rich buying mansions. The larger impact will be on locals thinking "this is the end of chinese money, so the market will tank!", which will scare them away from the market.
- kamilszybalski 10y ago
  Agreed. There's also the fact that foreign investment, or foreign real estate purchases, use proxies, which don't fall under this new tax. Too little, too late.
atemerev 10y ago
If foreign investors are happily buying "overpriced" properties at huge premiums, why not simply build more?
- raquo 10y ago
  Because you'll never build enough. Global demand surpasses potential local supply by a huge margin. Prices won't even begin to drop.
  - pklausler 10y ago
    That's even more reason for local investors to build more.
  - atemerev 10y ago
    Vancouver is Canada, with lots of undeveloped spaces available. It is not Manhattan or Hong Kong (not that Manhattan is some sacred land too that everybody should live there). It can be safely increased in size many times. But some might say this will drive property prices down? Mission accomplished!
    - raquo 10y ago
      That's ridiculous, a city growing in size or density will never see decreased property prices. This will actually increase the prices because the city is now a more "desirable" place to be (for some). Foreign money is a real problem, there is no way around it. If you want your city's housing market to be a wide open safe haven for everyone in the world to park their money in, you're going to push out the locals because these investors' demand for housing does not increase locals' incomes, it only increases housing prices. In Canada this problem is especially bad because of immigration loopholes for the rich. For vast majority of Vancouver properties it actually costs less to buy permanent residency via Quebec's immigrant investor program (~$100K in interest payments, no other requirements) than to pay this stupid 15% tax. Just let that sink in for a minute.
      - 10y ago
mywittyname 10y ago
The province could pass a law that allowing them to seize the assets of a foreign owner who does not occupy or rent their residence. Have this law apply to companies that hold single-family residence as well. If it passes legal muster, the threat of losing your property is probably enough to dissuade a lot of foreign investors.
- Thriptic 10y ago
  Wouldn't that also harm anyone with a vacation property?
  - mywittyname 10y ago
    It would harm a lot of people. But the problem they are trying to solve is foreign investment driving up property prices. The best way to attack his problem is to prevent or discourage foreign investors from buying residential homes. The good thing is this kind of law can be adjudicated, unlike the tax. Because you can go before a judge/mediator and argue that you use the home as a residence. The current tax scheme just hurts foreigners that live and work in Canada, not the people who buy up million dollar properties (which is exactly who the law intends to target).

89 points by dotch 10y ago

What's the reason for this? Is it because it's bad for real estate in a living city to be used as an investment vehicle?

zdkl 10y ago
...as the article states... Foreign investors drive up costs for locals. Locals unhappy, add tax for foreign investors. Foreign investors potentially wronged because of various agreements Canada has joined limiting protectionist actions like these. Or read the article, that'll answer your question.
bluedino 10y ago
It's free money, and it looks really good as protecting local interests. A Chinese or Russian millionaire looking to buy property in Vancouver is going to buy whether it's $5 million or $5.75 million
- newacct23 10y ago
  >A Chinese or Russian millionaire looking to buy property in Vancouver is going to buy whether it's $5 million or $5.75 million I don't know why you believe this to be true but it isnt
ZeroGravitas 10y ago
Property ownership is often subsidized, maybe they feel this is just rebalancing the subsidy for the people they don't want to subsidize? (Just a guess, I don't actually know)

goatherders 10y ago

There is nowhere for people to live that is affordable and it's hurting the economy (particularly tech). Young people are commuting up to 2 hours each way to work while tons of condos sit vacant as foreigners park their cash in the market. Even those wanting to buy with traditional financing are losing out to all-cash buyers above asking.

MichaelBurge 10y ago
Why don't they hire a property management company to rent it out? Whatever's preventing that sounds like the real problem here.
- doc_holliday 10y ago
  Well because the property is extremely overpriced when you consider market rate rents the yields are extremely low. You can only charge as much rent as the market will bear, which in some ways makes rental completely different to ownership prices. Basically the people buying it don't deam the return on renting it worth the risk of a bad tenant or worth the hassle. They don't need cashflow, are either using it as a safe holding of value or as a quick escape property if they need to leave insert country here for political reasons. It's happening the world over.
  - lintiness 10y ago
    sounds like you guys should dump as many of these properties on these fool heads as possible. you can buy them back in a few years for a lot less.
    - saosebastiao 10y ago
      Exactly what came to my mind. I saw this same behavior happening in 2005. When there is no marketable cash-flow producing use of investment property, you are in a bubble.
      - 10y ago

skizm 10y ago

LLC with one Canadian involved gets around this I believe.

tantalor 10y ago
AKA tax evasion
- roel_v 10y ago
  Only in a tax system with 'taxee had to prove good faith' basic rules, which luckily aren't that common.
- CalRobert 10y ago
  More avoidance than evasion, really. It's not _against_ the law, even if it's not liked.
_delirium 10y ago
The usual skirt around a lot of real-estate law. Also a common way people (and companies) avoid triggering a revaluation for California Prop-13 purposes when selling property: the property is owned by a holding company, and people buy and sell stakes in the holding company, being careful to never buy/sell a >50% stake in any individual transaction. (The latter part is because California does make an effort to close this loophole: sales of a majority stake in an LLC imply the property it owns has changed hands. But then people just never do that, sometimes aoviding it in fairly brazen ways, e.g. Michael Dell bought a holding company without buying more than 50% of it by splitting the purchase between himself, his wife, and one of his business partners: http://www.santamonicadispatch.com/2013/05/prop-13-gives-edge-to-dell/ http://www.santamonicadispatch.com/2013/05/prop-13-gives-edg...).

caffodian 10y ago

Vancouver is currently a mess of low interest rates, FOMO, foreign buyers, and supply issues. Due to both the city & BC government having a large number of developer donors, it's also a very partisan issue. For the longest time, the ruling provincial party was of the opinion that this was not a problem and high property prices was due to the strong economy (circular logic, as real estate & construction are the drivers of that.) They were getting pretty hammered in polls. On top of that, they cited a ~5% ish foreign purchaser number based on 19 days of data, only to then bump it to 10% conveniently on the release of new data a day or two after introducing this 15% tax...so yea. It's a disaster.

nathanvanfleet 10y ago

I live in Canada and basically Vancouver, possibly the Canadian city with the nicest weather, is completely cut off to me. It's not even like Silicon Valley etc where there is an industry and you can find a job that pays better here, it's just completely too expensive. There was a website called something like "crack house or million dollar Vancouver home" because knock-down quality bungalows were selling for over a million dollars there.

deanCommie 10y ago
You could rent. Rental prices in Vancouver are fairly reasonable relative to purchase prices.
- caffodian 10y ago
  The rental market has begun heating up lately (stories of rental auctions, renovictions, evictions for airBnB, etc) so although they may be comparatively reasonable, they may not stay absolutely reasonable for long.
- feklar 10y ago
  0.8% vacancy rate, good luck renting also landlords all use fix term year leases now where you agree to move after it expires in order to bypass the provincial rent increase cap and raise your rent +30% https://www.biv.com/article/2016/6/tight-rental-market-bc-landlords-dodge-rent-laws-f/ https://www.biv.com/article/2016/6/tight-rental-market-bc-la...
  - goatforce5 10y ago
    FWIW, pre-agreed termination agreements like this are void in Ontario. I suppose it's to avoid exactly the situation you describe. http://www.ontariotenants.ca/law/act05.phtml http://www.ontariotenants.ca/law/act05.phtml
    - hackerboos 10y ago
      Ontario's rental laws are great compared to other provinces with the exception of maybe Quebec. Once you sign a lease you and roll on month-to-month it's unlikely you will be evicted. Landlords either need to sell the property or move into it themselves to get the property back.

inanutshellus 10y ago

FWIW, this is a repost from 7 days ago: https://news.ycombinator.com/item?id=12212981 https://news.ycombinator.com/item?id=12212981

randomgyatwork 10y ago

I like how this article frames it as an issue about the 'free movement of capital.' In a lot of instances 'free-trade' agreements exist to help the mega-rich, this seems like a perfect example.

ab5tract 10y ago
Critical analysis of neoliberal economics is not likely to be found in the pages of one of its primary mouthpieces, though sometimes the Economist does surprise and actually mentions an externality or two.
- inopinatus 10y ago
  I think this is an unfair generalisation. The Economist has always had free-market leanings, long before the term "neo-liberal" was spawned. Moreover even a cursory glance at their comments feeds (you'll need a strong stomach of course) reveals an equal quantity of complaining about this "leftist organ" and its "socialist liberal agenda" as there is about being a "trade agreement apologist" or "capitalist rag". It may be the only way to gauge impartiality is when everyone is equally offended.
- hx87 10y ago
  The Economist is classically liberal, not neoliberal--they're too hostile to monopolies, oligopolies and rent-seeking to be the latter.
SmellTheGlove 10y ago
No way man. This means you're free to buy up real estate in all of those desirable Chinese cities. Go on. Invest.

overcast 10y ago

Wonder if San Francisco could do the same to these foreign real estate squatters.

feklar 10y ago
The tax only really affects landed immigrants who live and work in BC, and foreign capital investments in new developments as the Chinese speculators with billions who want to park money in Vancouver have already found ways around it because they can deposit millions to set up national corporations and have it do all the land holding/flipping. For example my sister who has lived here 30yrs with American citizenship will have to move to another province or back to the US if she sells her house since she will be eligible for the 15% tax buying a new place, on top of all the other existing taxes so is looking at +20% tax when her family outgrows their home.
- PakG1 10y ago
  My brother is a real estate agent in Vancouver. He is really upset at this law because precisely this. He predicted before the law passed that the ones who will suffer most from this tax will surely be honest immigrants. He says that the law doesn't close the right holes to protect the right people, and it certainly doesn't deal with the supply-side issues, only the demand-side.
- querulous 10y ago
  the tax doesn't apply to permanent residents. just resident temporary foreign workers and non-residents
- allengeorge 10y ago
  If she's a PR then the tax doesn't apply...
- goatforce5 10y ago
  re: setting up Canadian corporations with foreign money > The release defines foreign corporations as companies "not incorporated in Canada or, incorporated in Canada, but controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange." It remains to be seen how much effort will go in to enforcement re: determining the ultimate ownership of companies investing in Vancouver real estate. > According to a release, the government defines a foreign national as someone who is not a Canadian citizen or permanent resident, "including stateless persons." Presumably your sister has permanent resident status and is exempt from the new tax because of that. http://www.cbc.ca/news/canada/british-columbia/metro-vancouver-home-sales-foreign-buyers-tax-1.3694167 http://www.cbc.ca/news/canada/british-columbia/metro-vancouv...

astazangasta 10y ago

I have been upset by how quickly many people have concluded that the problem in San Francisco (et al) is something something supply/demand and not about speculation, and that the solution is to open up zoning laws and allow new development. The existence of enormous wealth inequality means a few billionaires can easily scoop up all the available property on the market in San Francisco, and thus the housing price is extremely vulnerable to speculation. Since land is the most valuable thing you can own, and thus the most lucrative thing to speculate on, I am sure this is happening. Here http://voxeu.org/sites/default/files/schularick_fig1.png http://voxeu.org/sites/default/files/schularick_fig1.png is a figure from a recent paper showing a dramatic rise in the price of housing since 2000. The authors of this paper again conclude that something about movement or building or zoning needs to change. I disagree. To me it is obvious that this shift after 2000 is the result of speculation. Specifically, we know that the Commodity Futures Modernization Act of 2000 opened up a vast new derivatives market in the hundreds of trillions of dollars. This market contributed to a series of enormous bubbles and speculative bursts - e.g. the energy market speculation that Enron caused, and later the housing bubble that destroyed the global economy, still ongoing. It seems obvious to me that the sudden and dramatic rise in land price is at least partially, and probably mostly, related mostly to derivatives and speculation. We didn't change much since 2008 - it stands to reason this would still be ongoing. It is also my belief that the recent push to "build build build" and "rezone" in SF is a result of this speculative putsch, which wants new and valuable property in SF to make good on the bubble of speculation. Since this bubble is driven by billionaires in tight markets (not poor people being given fraudulent mortgages nationwide), it's probably harder to see and pop. But I really, really wish people were paying attention to this more. We haven't learned the lesson of 2008 - things have changed, and not for the better.

sergers 10y ago

A move by local government to drum up votes for upcoming election. Make it look like we doing something, at the same time raising additional budget with the tax surplus. I think it's too little very late. 15%tax on illicit funds is just cost of doing business ( with says around it too). Quote from a localasian realtor to me: "now my client can't buy the 9million dollar house he wanted for investment cause of tax." in one scenario

kennywinker 10y ago
Damn right it looks that way! My uncle, a Vancouver real estate agent, was talking about how the market had all but halted it's growth just a few months before this change was announced. I'm not informed enough to know for sure, but I'd guess this is the provincial government trying to take credit for that slowdown after the fact.

velodrome 10y ago

The Canadian housing market is currently in a bubble. The same can be said about the Australian housing market. Canada http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-CHART-570.jpg?4 http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-... http://static5.businessinsider.com/image/54aea0136da8118f2ae2093d-986-726/screen%20shot%202015-01-08%20at%2010.14.22%20am.png http://static5.businessinsider.com/image/54aea0136da8118f2ae... Australia https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAACA8/XD2HC6aV-Qk/s1600/Australia%2BHouse%2BPrice%2BIndex%2Bvs%2BInflation.jpg https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAAC... http://www.propertyobserver.com.au/images/stories/keenjan2.png http://www.propertyobserver.com.au/images/stories/keenjan2.p...

hellogoodbyeeee 10y ago
A bubble is a more complex phenomenon than large price increases. A bubble is inflated by speculation that isn't rooted in anything except the rising price. If rich foreigners are buying property to summer in because they like the weather, then not a bubble. If rich foreigners are buying property because the property has gained X% in price every year for the last ten years but they don't know anything about the specifics of the local real estate market, then more likely a bubble. You also can't say something is a bubble until after it pops.
- skylan_q 10y ago
  A bubble is inflated by speculation that isn't rooted in anything except the rising price. It's been like that for the last 8+ years.
  - vinceguidry 10y ago
    Hence the reason for the second rule. You don't know what they're propped up on until they disappear.
  - hellogoodbyeeee 10y ago
    You are trivializing how difficult it is to determine this. For example, is the empty mansion empty because someone is speculating with it or because a globe trotting billionaire forgot he bought it? I'm sure there is speculation going on in the market, but we can't tell to what degree without polling the people buying real estate.

Tiktaalik 10y ago

I'm generally in favour of this policy, though it's a bit half baked, and it is too little, too late. It was probably only implemented because the government had done nothing on the file, is coming into an election, and realized they were going to get thrown out by an angry electorate. In a lot of ways Vancouver has been ruined by the housing bubble and influx of speculative foreign capital. Extremely high house prices have created a strong incentive for anyone who can easily work elsewhere (ie. a tech worker) to move away. Many of my friends have drifted away to Seattle and SF. The only way houses could become even slightly affordable at this point would be a housing crash. This would be disastrous to the local economy, which has become entirely built on selling housing to one another. Accordingly it's hard to wish for that.

jpollock 10y ago

The last paragraph indicates the precise problem with this policy - it isn't adhering to the terms of the free trade agreements that Canada has signed - both NAFTA and the "China Foreign Investment Promotion and Protection Agreement" require that offshore investors be treated the same as onshore. The CFIPPA [1] is clear on the subject: 1. Each Contracting Party shall accord to investors of the other Contracting Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the expansion, management, conduct, operation and sale or other disposition of investments in its territory. Perhaps the claim is that the initial purchase of the asset is what's being taxed, which might be seen as exempt? [1] http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/china-text-chine.aspx?lang=eng http://www.international.gc.ca/trade-agreements-accords-comm...

pesfandiar 10y ago
I don't know much about the legal aspects of international agreements like that, but is real estate considered an investment vehicle like e.g. bonds and stocks? You'd think there should be some exceptions, since real estate is enabling local communities, and you know, provides shelter for people to live in.
- skylan_q 10y ago
  Vancouver is tight and they aren't building/aren't allowing more building in the immediate area. Housing is for people to live in, but far too many have been speculating.
  - EnFinlay 10y ago
    There is a lot of building happening in Vancouver right now, mainly housing blocks being turned into high rises.
SmellTheGlove 10y ago
Forgive me because I don't know how to blockquote here, this is the definition of "investment" from the agreement you linked: 1. “investment” means: (a) an enterprise; (b) shares, stocks and other forms of equity participation in an enterprise; (c) bonds, debentures, and other debt instruments of an enterprise; (d) a loan to an enterprise (i) where the enterprise is an affiliate of the investor, or (ii) where the original maturity of the loan is at least three years; (e) notwithstanding sub-paragraphs (c) and (d) above, a loan to or debt security issued by a financial institution is an investment only where the loan or debt security is treated as regulatory capital by the Contracting Party in whose territory the financial institution is located; (f) an interest in an enterprise that entitles the owner to share in the income or profits of the enterprise; (g) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution; (h) interests arising from the commitment of capital or other resources in the territory of a Contracting Party to economic activity in such territory, such as under (i) contracts involving the presence of an investor’s property in the territory of the Contracting Party, including turnkey or construction contracts, or concessions to search for and extract oil and other natural resources, or (ii) contracts where remuneration depends substantially on the production, revenue or profits of an enterprise; (i) intellectual property rights; and (j) any other tangible or intangible, moveable or immovable, property and related property rights acquired or used for business purposes; but “investment” does not mean: (k) claims to money that arise solely from (i) commercial contracts for the sale of goods or services, or (ii) the extension of credit in connection with a commercial transaction, such as trade financing, other than a loan covered by sub-paragraph (d); or (l) any other claims to money, that do not involve the kinds of interests set out in sub-paragraphs (a) to (j); I'm not an expert on Canadian law, but in the US at least, that definition does not appear to me as though it would cover real property. Property itself refers to chattel, and real property would need to be expressly included. So I'm not sure that they have a problem, as real property doesn't fall under the ordinary definition of an investment, and it's not encompassed in the agreement definition of investment above. Disclaimer: I'm not your lawyer. I know nothing about Canadian law. I am a dog pretending to be a lawyer on the internet.

skylan_q 10y ago

This tax won't do much to impact the market directly as foreign capital makes up about 4-8% of the purchase activity, which is elevated but not outrageous. Foreign funds also buy at the same average price as local funds so it's not about rich buying mansions. The larger impact will be on locals thinking "this is the end of chinese money, so the market will tank!", which will scare them away from the market.

kamilszybalski 10y ago
Agreed. There's also the fact that foreign investment, or foreign real estate purchases, use proxies, which don't fall under this new tax. Too little, too late.

atemerev 10y ago

If foreign investors are happily buying "overpriced" properties at huge premiums, why not simply build more?

raquo 10y ago
Because you'll never build enough. Global demand surpasses potential local supply by a huge margin. Prices won't even begin to drop.
- pklausler 10y ago
  That's even more reason for local investors to build more.
- atemerev 10y ago
  Vancouver is Canada, with lots of undeveloped spaces available. It is not Manhattan or Hong Kong (not that Manhattan is some sacred land too that everybody should live there). It can be safely increased in size many times. But some might say this will drive property prices down? Mission accomplished!
  - raquo 10y ago
    That's ridiculous, a city growing in size or density will never see decreased property prices. This will actually increase the prices because the city is now a more "desirable" place to be (for some). Foreign money is a real problem, there is no way around it. If you want your city's housing market to be a wide open safe haven for everyone in the world to park their money in, you're going to push out the locals because these investors' demand for housing does not increase locals' incomes, it only increases housing prices. In Canada this problem is especially bad because of immigration loopholes for the rich. For vast majority of Vancouver properties it actually costs less to buy permanent residency via Quebec's immigrant investor program (~$100K in interest payments, no other requirements) than to pay this stupid 15% tax. Just let that sink in for a minute.
    - 10y ago

mywittyname 10y ago

The province could pass a law that allowing them to seize the assets of a foreign owner who does not occupy or rent their residence. Have this law apply to companies that hold single-family residence as well. If it passes legal muster, the threat of losing your property is probably enough to dissuade a lot of foreign investors.

Thriptic 10y ago
Wouldn't that also harm anyone with a vacation property?
- mywittyname 10y ago
  It would harm a lot of people. But the problem they are trying to solve is foreign investment driving up property prices. The best way to attack his problem is to prevent or discourage foreign investors from buying residential homes. The good thing is this kind of law can be adjudicated, unlike the tax. Because you can go before a judge/mediator and argue that you use the home as a residence. The current tax scheme just hurts foreigners that live and work in Canada, not the people who buy up million dollar properties (which is exactly who the law intends to target).