By now you may have heard of the new Foreign Buyer Tax introduced in British Columbia. With the purpose of this tax being a means to slow down the fast pace of the current house prices in the Vancouver and surrounding area – this begs the question will this tax prove successful?
This tax means that now a 15% transfer tax will be included when foreign buyers are looking to join the residential real estate market in the Metro Vancouver region. What that being said – how does this then affect the overall affordability of the housing market in B.C, particularly for the middle class population who may also already have be struggling with paying off debt?
While it is perhaps a bit difficult to predict what will happen exactly, there are many opinions flying around on the success as well as the failure of this new policy. Many housing experts for example, have predicted that while this foreign tax will slightly lower the average price of homes, these prices are not expected to drop very significantly.
The reason being – the demand seen in the housing market – which commonly includes bidding wars and ongoing competition among buyers who are trying to swoop up the properties they want, again may point to the fact that this housing decision is unlikely to bring about a drastic change of any kind. The fact that the percentage of foreigner buyers is estimated to only be about 10% of the buying population in that area could also support this side of the debate.
On the other hand, other financial experts believe that this policy will in fact mean a decrease in average housing prices closer to 25 -even 50%. From this standpoint, it is also speculated that this tax will not necessarily deter foreign home buyers altogether so this could makes the waters again a little bit murky when it comes to envisioning the overall effectiveness of the new tax ruling.
This perhaps is an ‘only time will tell’ sort of scenario – as it is unknown to what extend of the number of foreign buyers will shy away or stick it out and grab ahold of the Vancouver property ladder. Ultimately, if the majority of foreign buyers do accept the tax increase, this may mean many different scenarios for the housing market.
Depending on what happens in the Vancouver markets, this foreign buyers tax could even be utilized in other Canadian housing markets – for example, Toronto – where housing affordability is also currently a major issue for buyers.
Among the housing professionals there appears still appear to be many skeptical views that point towards an unsuccessful outcome when it comes to the foreign buyer tax released earlier this summer in the Vancouver area. Others however, feel that with a bit more time – this newly implemented tax could begin to work more effectively – and the house prices could start to decrease further – resulting in an overall more affordable housing market in the Metro Vancouver area.
Regardless of which side holds more weight or proves to be a more likely outcome – the housing market in many of Canada’s major cities – with Vancouver at the top of this list was certainly getting out of hand and too far out of reach for many potential home buyers. Therefore something had to be done – and time will tell if the Foreign Buyers Tax will be just the ticket.
