Premier?s announcement of foreign-buyers tax about-face from previous position on the issue
Michael Smyth
The Province
In a hyper-inflated housing market fuelled partly by quick-buck property flippers, the biggest flip of all came Monday from Premier Christy Clark.
A big flip-flop, that is, after the Clark government brought in a surprise 15-per-cent tax on foreign home buyers in Metro Vancouver after rejecting and even mocking the idea for more than a year.
“British Columbians first,” Clark said in wheeling out a new slogan she’ll repeat continuously from now until election day next May.
“There is evidence now that suggests very wealthy foreign buyers have raised the price of overall housing. If we can make it a little bit harder for those wealthy foreign buyers, we are going to make it a whole lot easier for those middle-class British Columbians we want to put first.”
This is a stunning about-face for Clark and her governing Liberals, who spent the last year scolding critics for suggesting offshore capital was distorting the housing market.
“Industry experts estimate that most of the real-estate speculation taking place in the region is being done by local investors,” Clark said last year, while suggesting it was “fiction” foreign buyers were fuelling stratospheric price hikes.
Prices across the Metro region have soared to well over $1 million for a detached house — much higher in many neighbourhoods — with townhouses and condo prices going bonkers, too. But the government fiddled while the market burned.
Finance Minister Mike de Jong said repeatedly that offshore investment in the housing market was actually a good thing.
“We’re actually proud of the fact that we have a jurisdiction in British Columbia that people want to come to, that they feel they can succeed in, that they want to invest in,” de Jong said in May.
That comment came during a typically raucous question period, where the Liberals delighted in taunting the NDP Opposition with shouts of “Show us your tax!” as the New Democrats demanded action.
And now the action is here in the form of a 15-per-cent tax that will cost a foreign buyer an additional $300,000 when purchasing a $2 million home in Metro Vancouver.
The new tax, which kicks in Aug. 2, also applies to foreign-controlled corporations and the government said it could increase the tax or expand the area where it’s applied.
I’ll predict right now the government will impose the new tax in Victoria, too.
And do you think the premier is going to let this issue trip her up in her home riding? I doubt it, which is why you shouldn’t be surprised to see the tax expanded to Kelowna as well.
Critics demanding a crackdown on foreign capital flooding these markets had a universal two-word response to the government’s announcement: About time.
“It’s flip-flop season here in B.C.,” NDP Leader John Horgan said in the legislature, where it was his turn to mock the government.
“First, you deny there’s a problem. Then you claim that the Opposition is fearmongering. And then you say: ‘I’ve discovered the problem and I’m going to correct it.’ Well, I think the public is going to see right past that.”
Whether the public remembers the flip-flop at election time may depend on whether the new tax is effective in staunching the inflow of foreign money.
But critics, including University of B.C. professor Tom Davidoff, were quick to point out loopholes in the government’s scheme.
“The question is whether that foreign money is going to find its way into the Vancouver housing market anyway through related parties,” Davidoff said. “If your cousin is a permanent resident or citizen, you just buy through them.”
San Souci Executive Realty president Alex Majdpour, who does a lot of business with Chinese clients, said offshore buyers could continue purchasing property through kids attending school here.
“They go around the tax implication,” he said.
Despite flaws in the plan, Clark will now portray herself as a champion of local homebuyers and an opponent of foreign speculators.
“I want to keep home ownership in the grasp of the middle class,” she said.
The government on Monday also cleared the path for an empty homes tax in Vancouver, committed $75 million to a new housing fund and promised long-overdue help for first-time homebuyers.
“It will make a very big difference for all those British Columbians who want to make sure, particularly in the Lower Mainland, that they can still afford to live in their own city,” Clark said.
What she didn’t mention is that two-thirds of voters thought she was doing a lousy a job on the issue, according to recent polls.
With an election looming, she had to do something.
The NDP will remind voters that Clark had to be dragged kicking and screaming to do it and that her governing Liberals pocketed more than $12 million in campaign donations from profit-drunk real-estate companies before they finally realized they had a political problem on their hands.
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