Scot thinks the latest column by Ian Young in his column, “The Hongcouver,” makes for a good read in the South China Morning Post:
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Is it a mistake to offer exemptions from the Vancouver foreign buyer tax to home purchasers with Canadian work permits?
Almost as soon as BC Premier Christy Clark announced the plan at the Vancouver Chinatown Lunar New Year parade last week, newly graduated foreign students – who are entitled to post-graduation work permits lasting up to three years – were eagerly eyeing the proposal.
“I’ve just graduated and got a work permit. Can I buy a property with a loan? How much can I borrow?,” asked one reader of WuBianVision, a popular Chinese-language real estate blogger on the WeChat platform.
“I recently graduated and got a work permit. Can I buy a property now?” asked another last week.
Are these presumably foreign-funded buyers the folk that Clark now wants back in the Vancouver real estate market, which has seen sales nose-dive 40 per cent in the wake of the tax?
It shows that we need to increase taxes on properties, when buying, while holding and when selling FOR ALL. Then we can rebate resident Canadian income tax payers or seniors. To compensate, we ought to lower income taxes which are far too high, 33% on the top end for the federal government and up to 14-18% for the province, depending on what province. Where is the incentive to work hard and make $200,000+ ? The incentive is to buy a big house, and sell it for maximum profit, tax free. This is healthy ? This is good governance ? Taking 25-33% of your average pay cheque is healthy why ?
Any foreigner studying worldwide real estate investment opportunities sees Canada as a bargain, ripe with loop holes to evade taxes. At least some of these are finally being closed now, for example the forms to fill out what nationality the seller is so we can track multiple owners/sellers who claim multiple residents are a first home or “forget” to report the gain. Much ground to cover here as a large amount of taxes is evaded here by locals and foreigners alike.
We ought to learn from Texas, which has zero state income taxes. Yes zero. But they have high consumption taxes, about 8%, high for the US, and very high property taxes, roughly triple to quintuple Vancouver’s for a similar home. Buying consumer goods incl a high end house is a choice, and we ought to tax that, rather than income. In addition, in the US you can deduct your property holding cost, primarily property taxes and interest on your mortgage, from taxable income, essentially cutting by 1/3 to half the true carrying costs vs a non-income tax paying US citizen.
Apparently in B.C. in this century if you make over 400k, the tax cut at this point amounts to 38k+. The effective tax rate is lower than that paid by the bottom decile of income earners. It’s most important to have justice for the highest income earners in a society.
https://thetyee.ca/Opinion/2017/02/17/BC-Tax-Giveaway-to-the-Rich/
This article conveniently forgets GST (5%), federal income taxes, which are 33% on the top end and property taxes.
“According to Statistics Canada data, in 2013 the top 10 per cent … paid 54 per cent of federal and provincial income taxes. .. When we account for all these taxes, our calculations find that the top 10 per cent … pays 40 per cent of all taxes. … Canada’s top personal income tax rate is second highest among G7 countries, behind only France” http://business.financialpost.com/fp-comment/how-much-of-a-fair-share-do-canadas-top-earners-pay-you-might-be-surprised ” Consider that the bottom half of earners .. pay only 15 per cent of all taxes.”
Seems all pretty fair to me, proportionally, but of course the overall tax burden is far too high, and the main cause of that is excessive civil servants’ wages as they eat up over 70% of all tax spending ..
No, this exemption isn’t a mistake. It’s just kind of moot. No bank is going to lend serious unbacked money to the holder of a Work Permit; especially one who’s just graduated university and is working at Starbucks. To be endowed with that kind of fiduciary trust from a financial institution you need be a Resident anyway. There will be perhaps a dozen immigrant families with ready-cash who will take advantage of this “Highway 99”-sized loophole for Work Permit holders. The rest will just continue to be disappointed.
I’m not normally one to defend Mrs. Clark, but the article speaks more to Mr. Young’s ignorance of being an immigrant than of anything nefarious from the premiere.
The University of Billionaire Chinese has dozens if not hundreds of those cash flush investor / students .. incl Maseratis, BMWs and lambos with an N on the rear. Big business for UBC and car dealers, not just condo developers.
No Lambos in my neighbourhood. Of course, it’s a lot further east. Perhaps Crème has attained a new meaning.
I live at UBC. I see them daily, sometimes several in a row. Usually a young Asian driver. Good business for UBC, car dealers and condo developers. If you were a billionaire and had two kids, what would you do ? Buy a condo for $2M, with low taxes and no capital gains taxes. Pay $20-40,000 tuition a year plus $200,000 for a car plus $100,000 a year spending money. Less than $3M. Peanuts. If you invest $1B at 3% you’d make $30M a year. You could do that for ten kids and still not lose. Most of course have only one or two kids at most. Plenty of billionaires or folks with a mere $100M net worth in Asian or elsewhere. Plenty.
More racist bigotry coming from Thomas Beyer.
Why does PriceTags condone this behavior?
A dozen? Are you aware of how many Chinese millionaires have kids enrolled at UBC or SFU? Not surprisingly this is a sop to the developers who fund the BC Liberals (and Vision Vancouver) and everybody else gets screwed.
Not quite. A $2M condo just doesn’t fall out of the sky, you know ? It employs architects, city planners, interior designers, realtors, plumbers, painters, furniture retailers, mattress delivery people, window installers, elevator mechanics, crane operators, truckers, bankers, property managers etc .. all paying income taxes and/or GST and/or PST by the billions annually into BC coffers.
Many a retiree in Dunbar or E-Van cashes out and moves to the island or the Okanagan in style, too !
Overall FAR MORE winners than losers !
I agree that having all these rich people buying up property is pumping our economy. But, the economic spin-offs are not wide-spread and are detrimental to most people. Why? Because for most people, housing is staple, not a luxury item. It’s like saying that the economy could make billions if water was priced at $1000/litre. Sure, some people and industries would reap the rewards, but most others would suffer immensely.
Also, our economy needs to wean itself down of real estate. We’ve become too dependant on it. Not only is overly relying on one big thing dangerous, this one big this is harming other parts of the economy. In Alberta, they rely on oil and gas. But, at least oil and gas is not harming other parts of the Alberta economy. Here in Vancouver, companies cannot hire people because they can’t afford housing. Restaurants and stores are going out of business because of skyrocketing rents and commercial property speculation. Plus, they’re losing customers because everyone is staying home because no one can afford to eat out anymore. We’re even losing farms now.
I think, overall, FAR MORE losers than winners!
http://vancouversun.com/opinion/editorials/editorial-b-c-economy-depends-on-real-estate
“Real estate and construction together represent roughly 25 per cent of B.C.’s GDP, about the same dependence Alberta has on the oil and gas industry.”
And, that’s the OVERALL BC number. Just imagine what the Vancouver GDP % is.
Not every immigrant is very wealthy. Only few are. Many are mere middle class. If you drive through Burnaby, for example, with its tiny condos, this is not even middle class. Yet they too own condos. But yes we are quite dependent on it. Without it, BC would not be the wealthy province it is. Assuming immigration will not end though, and assuming no more new land is being created, the real estate construction will continue in the Lower Mainland as will price appreciation, albeit not at the torrent pace we have seen the last 2-3 years, but still 2-3%/year. It will NEVER be cheap again. Students from all over the world will continue to come and say “wow, look at this view” or “wow, look at the clean air” or “wow, where are all the people” or “wow, where is it better” .. and continue to stay by the thousands every year !
Alberta is too dependent on one commodity for its wealth. The piper is now being paid through an unprecedented downturn in oil prices caused by forces beyond its control.
If BC is as dependent as Alberta on one element (real estate) without several viable back-ups, then we are in trouble. I for one don’t believe this comparison holds up to scrutiny. If BC’s economy is diversified enough, it will be able to ride out a real estate downturn without as much devastation as Calgary and other Alberta cities are experiencing all around.
It also depends on how far a real estate downturn will go here. It could lower to a more reasonable level of true value from today’s volatile inflationary value, but likely not down to rock bottom due to supply and demand dynamics. Value is also highly variable on location. See above comment on no Lambos (and few empty homes) east of Cremeland where prices are the low side of high.
Diversification is key.
I would add that BC’s real estate affordability issue can be controlled to a further extent by local forces than Alberta’s oil industry woes. Metro city councils and planners could wield a pen to change zoning regulations to allow more housing per unit of land area in the vast middle ground between large lot detached and soaring condo towers. The province + feds could also wield their pens to address foreign income and citizenship loopholes, but that will likely not have the same effect on affordability as popping the bubble that preserves zones that arose from 1950s subdivision planning.
The alleged Lower Mainland “real estate downturn” is basically over as house prices in inflated areas have already dropped 15-20%, due to three factors:
a) 15% foreign tax
b) rising Can $s vs US $
c) increased Chinese currency controls, incl. real estate
Condo rices are on the rise, and there is no more land to build new houses (THs or SFHs). 30-40,000 people come here every year, with no more land being created (although of course we could)
In case you wish to get into the market NOW is as good as it gets. This time next year prices will be HIGHER in almost all asset categories, unless there is a major plague or massive ex-migration.
…. there is no more land to build new houses ….
Geometry is kinda like the laws of physics: it is unassailable.
To paraphrase Mountain Math, 30% of all housing occupies 80% of all residential land in Vancouver. There is an abundant land supply within the Metro to build tens of thousands of TH and RH and low / mid-rise. The 50 and 60-foot lots within 300 m of the towers at Oakridge, Metrotown, Brentwood, Surrey Centre etc. demonstrate that we have a land management issue, not a land supply issue.
@Alex: that might have been true 50 years ago, but today it makes no sense to buy a 50 x 125 lot for $3M and build 2-4 THs as they each would be $2M+. It makes more sense to build a 5-8 story condo tower to get prices to below $1M.
That 50-foot lot value may hold true at Oakridge, but not at Surrey Centre. Yet the same increasingly discredited land use planning precepts govern them all. The urban Metro is six times the size of Vancouver. What applies to the west side shouldn’t be used as a blanket statement for everywhere else.
You’d think that there aren’t that many students who can buy a house in Vancouver, even students who drive Maseratis. But one of the issues around this foreign buyer thing is that the beneficial owner of the property, who lives out of the country and doesn’t pay taxes in Canada. Instead the spouse or child, who has no income and so doesn’t pay taxes in Canada, is listed as the owner. So a foreign student could well be the way to evade the 15% tax.
Property taxes should be higher but offset by an income tax credit. That way we can thank the beneficial offshore owners for paying for the schools, hospitals,parks & transit that they don,t use.