What is certain that Canada has long been concerned about foreign investment in its real estate. In 2014, the country scrapped an investor visa that was proving popular with Chinese buyers, which allowed them to apply for permanent residency, if they had a network of CAD1.6 million or more and invested at least CAD800,000.
The latest official figures show that foreign buyers purchased over CAD1 billion worth of property in British Colombia between 10th June and 14th July 2016, with the majority of activity accounted for by Chinese investors.
The new tax is aimed to cool foreign interest and deter buyers from snapping up real estate, thereby helping to cool house price growth. Revenue from the new tax is expected to be spent on housing affordability projects in the city.
Foreign buyers, though, still only account for a fraction of transactions: less then 20 per cent of sales between June and July. Nonetheless, with such a significant addition to the property purchase bill, the law is sure to have an impact upon foreign demand, with Bloomberg forecasting a 5 per cent drop in average prices across the whole of BC and as much as a 20 per cent drop in Vancouver.
The legislation, which must now be passed by the provincial legislature, will allow for the tax rate to be adjusted between 10 per cent and 20 per cent, should it be necessary, and also potentially expand it beyond Vancouver.
The news sees Vancouver join a growing number of markets that are attempting to curb foreign investment in their real estate and, as a result, help to cap price growth. Australia, Singapore, Hong Kong and Singapore have all introduced additional costs or taxes in recent years, or limited the type of property foreigners can purchase, while Dubai has also capped lending for overseas investors.