Slapping another 15-per-cent sales tax on homes to foreign buyers could cool the red-hot real estate market in higher priced areas of Richmond or Vancouver, but it might take longer to learn of any effect in Maple Ridge and Pitt Meadows.
The announcement by the B.C. government last week saw a rush to complete deals by the Aug. 2 deadline, but Tom Garvey, managing broker with Macdonald Realty, says it will be at least a month before the full effect of the tax is known in Maple Ridge.
“There’s not a huge amount of foreign buyers who are coming out to Maple Ridge,” said Garvey, who said he hasn’t noticed any effect so far in the local market.
But it’s early yet and time will tell.
“Let’s see what happens over the next two to four weeks.”
B.C. Premier Christy Clark announced the tax last week, saying it will take effect Aug. 2, prompting a rush of deals in order to meet the deadline and spare buyers thousands in extra tax.
Garvey said he would have liked to have seen the tax phased in so that deals in the works could have been grandfathered and allowed to close without the extra 15-per-cent charge. Also, the domino effect could reach as far Maple Ridge when deals in Vancouver collapse and sellers put on hold their plans to move to cheaper areas such as Maple Ridge.
He added that when the federal Goods and Services Tax was brought in, home purchases slowed. But, “After a while, people looked at it as the cost of doing business and kept going.”
He agrees with the concept of taxing foreign purchasers, but just doesn’t like the way it was implemented.
“It’s not just the foreign buyers it’s affecting. There are people who have sold to foreign buyers who it’s going to affect.”
Under the new tax, people who are not citizens or permanent residents of Canada have to pay an extra 15 per cent tax when property is bought in Metro Vancouver. Garvey expects the first areas to feel the effect could be West Vancouver, Richmond or Vancouver.
“It’s good the government took some action. It’s just unfortunate it was brought in so quickly and there’s an effect to existing deals that were done before Aug. 2 that didn’t complete in time.”
He pointed out that supply of housing isn’t meeting growing demand, citing Statistics Canada, which forecasts 54,000 people moving to the Lower Mainland of B.C. this year.
“Stuff isn’t being built fast enough to meet that demand. That’s what really been driving a lot of this for this last little while is the lack of supply.”
If cities were able to free up more land for housing, that could help.
Coquitlam realtor Kevin Morneau, who also sells in Maple Ridge, doesn’t expect the new foreign purchasers’ tax to have any effect here, saying that foreign buyers want to be closer to Vancouver.
He doesn’t like the super-heated housing market.
“It is fueled by one source and one source only” – China.
People who sold their homes in Coquitlam or in Vancouver for good prices are now moving out to Maple Ridge or Langley, putting more pressure on housing here.
People are frustrated.
“The buyers are frustrated, because there are multiple offers. The sellers are frustrated because they don’t want to sell because they don’t know where to go.”
Buyers are blaming the market or realtors or other buyers.
“It is a difficult market and is fueled by other people who have far too much money and are parking their money in properties … we have a very low vacancy rate here.”
Rebecca Awram is a Maple Ridge-based mortgage broker and has already had customers affected. Six foreign clients were thinking of buying in Maple Ridge, but hadn’t yet written an offer. Now, they’re backing off.
Four are families from the U.K. Two are from Australia. They will have to put a hold on their purchasing plans until they become permanent residents or citizens. It’s taken many people who considered themselves residents by surprise because they were here on working permits.
Awram is glad the government is doing something, but also doesn’t like the way it was implemented.
“It should never have been made retroactive on firm and binding contracts and I think it might even be challenged in court. It’s just not how you do business in a first-world country.”
Clark said Wednesday that there would be no exemptions to the new tax for real estate sales that were signed, but not registered before the deadline. That includes pre-sold condos that were purchased before construction, if they are going to buyers who are not citizens or permanent residents of Canada.
If deals are given up, that could trigger a domino effect, Awram added.
“These are people who are here. They’re working, they’re paying tax. These are normal, middle-class families that are trying to start a new life in Canada,” Awram added.
“The new tax is a deal-breaker for them. They simply don’t have access to that kind of money.”
She said her buyers could wait until they have their permanent residency, but that would mean paying higher prices in an increasingly escalating market. But that would be easier to manage than paying another $50,000 or $70,000 in taxes on to the purchasing costs.
Currently, the real estate industry is in the middle of its usual summer slowdown.
According to the Real Estate Board of Greater Vancouver, the number of detached home sales in Maple Ridge-Pitt Meadows have dropped 46 per cent from June to July, while the number of townhouse sales have dropped 30 per cent.
The median selling price for that time period has also dropped, but represents only a blip because in the first six months of this year, the median selling price for a detached home in Maple Ridge-Pitt Meadows has increased by more than $200,000.
From January to July 2015, the median selling price for a detached home here was $538,000. For the same period this year, it’s $719,000.