Foreign home buyers face new tax in Vancouver area

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Realtors signs displayed outside a newly sold property in a Vancouver, British Columbia in Canada.Image source, Reuters
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Foreign buyers will face a 15% property transfer tax beginning on 2 August

A 15% property tax on foreign home buyers in the Canadian city of Vancouver has taken effect in an effort to create more affordable housing.

The tax is aimed at preventing foreign investors, many from mainland China, from driving up costs in Canada's most expensive property market.

British Columbia's property transfer tax rates currently range from 1% to 3%, depending on a home's value.

The average cost of a Vancouver home increased 32% over a year.

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The average cost of a Vancouver home jumped 32% as of June, compared to the same month last year

Recent government data shows that foreigners have invested an estimated C$1b (£572m) in property in British Columbia, where Vancouver is located, between 10 June to 14 July.

About 86% of that investment was focused on Vancouver's metro area.

The new law, which took effect on Tuesday, imposes a one-time tax on foreign buyers, foreign-register corporations and Canadian corporations controlled fully or in part by foreign nationals or foreign corporations.

British Columbia will also hire additional auditors to help enforce the new tax.

Many have blamed wealthy overseas buyers for driving up the city's soaring house prices, a sentiment echoed in places like Australia, Hong Kong, Singapore and the UK.

There are some 11,000 homes in Vancouver that have been sitting empty for at least 12 months, according to city data.

Critics of the new measure argue that investors could find loopholes to evade the tax or that it might increase housing prices in other attractive Canadian cities.

Ontario's Finance Minister Charles Sousa said his government will follow the new tax "very closely" in the coming months as a possible solution to rising prices in Toronto, where the average cost of a home was C$746,546 in June -a jump of nearly 17 percent during the same month last year- according to the Canadian Real Estate Association.

Some real estate agents are concerned the tax could affect sales that are currently in negotiation.

Vancouver was also given authority to levy a special tax on vacant homes, which has been another major concern with foreign investors in the property market.

Mayor Gregor Robertson, who proposed the tax, has said the measure will encourage investors to rent their homes and help end the city's housing affordability crisis.