It was not long ago that the real estate community in Metro Vancouver held an unequivocal view of the notion foreign nationals from China were buying up the region in bulk and forcing house prices obscenely skyward in the process: It was unadulterated bunk.
The number of homes bought by people living abroad was an inconsequential fraction of the total, the real-estate association insisted. British Columbians with mean annual family incomes of $60,000, we were expected to believe, were behind the unprecedented feeding frenzy we were witnessing: Average Joes and Janes bidding hundreds of thousands more than asking for teardowns suddenly worth $2-million or more.
Initially, the Liberal government went along with this fantasy, not wanting to do anything to anger its friends in the real-estate and development sectors or stifle the lucrative flow of tax dollars these transactions were providing to provincial coffers.
Eventually, however, any allegiance the Liberals felt toward a group that had donated millions to their cause throughout the years was trumped by hard, political fact: The province's long-governing party faced the real prospect of losing next year's election unless it did something to address public anger over the high cost of housing. Which is how we ended up with the government in July imposing a 15-per-cent property-transfer tax on foreign nationals buying real estate in Metro Vancouver. The motivation was political survival, nothing else.
It has been fascinating, in the interim, to observe the angst the tax has stirred in the same real estate sector that had been insisting foreign nationals had little to do with the spectacular rise in house prices. Today, many realtors are suggesting sales have fallen off a cliff since the tax was introduced. Prices are cratering. Locusts should be arriving any day now.
It is clearly impossible for the real-estate industry to separate the public good from its own self-interest. Consequently, most anything realtors or their proxies say about this issue needs to be greeted with profound skepticism, if not outright dismissal. The idea that this tax is going to kill the real-estate business in B.C. is ludicrous. What it may affect is the eye-popping commissions many agents in this province, and in particular Metro Vancouver, have been pocketing. The number of new millionaires this sector has created over the past couple of years alone would undoubtedly shock (and infuriate) many.
Here are a few simple truths about the existing situation: 1) It is far too early to say what impact the tax will have on the market long-term. It has been less than a month since it went into effect. Let's give it six months, at least, before we begin to start drawing anything resembling firm conclusions; 2) If the tax has, in fact, slowed sales activity, this is only a good thing, as the gold-rush mentality that had taken hold was creating a price bubble that had become increasingly concerning for lending institutions across the country; 3) If the tax sends values down to the point it allows some people priced out of the market to get in, then it has accomplished something important; 4) The tax will not suddenly make Metro Vancouver a less attractive place to live. It will always be a global destination for the world's elite, and a little old 15-per-cent real-estate levy is not going to change that.
If the worth of someone's home on the west side of the city drops from $4-million pre-foreign tax to $3.7-million post, is that so awful? The owners could have paid $2-million for it a half dozen years ago. The profits people have made from the rise in values of their homes in just the past couple of years is more than many Canadians will make in a decade or more.
And if all this means real-estate agents will make just $60,000 for selling a home instead of $70,000 or $80,000, well, I guess they are simply going to need to find a way to adjust to this painful new reality. At least until the next big buying spree hits, as it invariably will, and a fresh panic sets in.
Meantime, remember: The foreign property-transfer tax is a good thing and do not let anyone try to tell you differently – least of all realtors.