In its latest attempt to curb fast-rising home prices, the Canadian province of British Columbia said Tuesday it would introduce stiffer measures targeting offshore investors looking to park their cash in Vancouver properties.
British Columbia’s move marks the second time in less than two years the West Coast province has intervened to tamp down house-price gains, which the government said has led to a housing crisis. More broadly, it is also the latest effort by lawmakers in far-flung places like Australia, New Zealand and Singapore to deal with skyrocketing residential prices fueled by offshore money.
“We are going to crack down on speculators who distort our market,”
British Columbia’s finance minister, said in the provincial legislature. The set of housing measures were presented as part of British Columbia’s budget plan for the 2018-19 fiscal year.
Soaring real-estate prices of more than 30% in a single year prompted British Columbia in the summer of 2016 to slap a 15% tax on house purchases by non-Canadians in the Vancouver market, making it the first jurisdiction in the country to take such a step. Vancouver housing prices slowed in the immediate aftermath but have since recovered to hit fresh highs. The benchmark price for a Vancouver residence was 1.06 million Canadian dollars ($837,000) in January, up 17% from a year earlier and an eye-popping 80% over the past half-decade.
To keep a lid on housing prices, British Columbia said it would boost the foreign-buyers’ tax to 20% from 15%, and widen its application beyond Vancouver to other heavily populated areas to prevent speculators from moving to nearby markets. It said it would also introduce a new speculation levy targeting property owners who don’t pay income tax in the province, and increase property taxes on homes valued at over C$3 million.
Ms. James added the province would eliminate loopholes that allow buyers to obscure their source of funds through numbered companies and offshore trusts, and the use of Local proxies to hold the property in their name.
“British Columbia is now applying the full-court press on housing affordability, pretty well pulling out all stops short of creating new land,” said Robert Kavcic, an economist at BMO Capital Markets.
British Columbia’s ruling New Democratic government was under pressure from the province’s Green Party to impose a blanket ban on foreign ownership in residential real estate, echoing a proposal from New Zealand’s center-left government to deal with that country’s surging property prices. The New Democrats are in government in British Columbia under a power-sharing agreement with the Greens.
The Green Party said the government’s housing proposals, while a welcome start, “are not a bold enough response.” It said its members would take a closer look at the measures in the coming days.
co-founder of Better Dwelling, an online housing News service, said British Columbia’s renewed efforts could have some bite in curbing house-price gains. “I think this could be a pretty big deal,” he said.
Mr. Kavcic concurred, adding the measures should help build on the impact of higher interest rates and stricter mortgage-financing rules that took effect Jan. 1.
Vancouver is Canada’s third-largest urban center, with 2.3 million people, and accounts for half of British Columbia’s population. Last year, investment bank UBS said the city was near the top of a list of global cities that are bubble-risk real-estate markets.
The role of foreign money, especially from China, in the Vancouver real-estate market remains a polarizing topic in the city. A recent study by Canada’s data-gathering and housing agencies indicated nonresident home ownership in Vancouver stood at 4.8%, and under 4% in Toronto.
But Local housing advocates and real-estate watchers say the study failed to paint an accurate portrait. “There is simply no mistaking the impact of foreign money, in this case largely from China,” said
public-policy professor at Vancouver’s Simon Fraser University.
Write to Paul Vieira at [email protected]
Source : WSJ