VICTORIA — British Columbia's plans to dampen the influence of foreign investment in Metro Vancouver's scorching housing market with a new tax on foreign buyers is causing widespread panic and confusion, say industry insiders.
Premier Christy Clark's Liberals are poised to adopt legislation that includes an additional 15 per cent property transfer tax on foreign nationals who buy residential real estate in Metro Vancouver. The tax, which takes effect next Tuesday, would add $300,000 to the price of a $2 million home.
Bob de Wit, the chief executive of the Greater Vancouver Home Builders' Association, said Wednesday there is much concern among foreign buyers who signed pre-sale properties agreements and are now trying to avoid paying the tax before it becomes law on Aug. 2.
"So far, in the first two days it's sort of mass panic of buyers worried about whether they can close and wanting to sign (before Aug. 2), which may or may not be available in the contract they've signed," he said. "There's basically a lot of panic out there and we're trying to keep people calm."
De Wit estimated there are 2,300 pre-sale properties in Metro Vancouver connected to foreign buyers.
Dan Morrison, president of the Greater Vancouver Real Estate Board, said the 15-per-cent tax is aimed at foreign buyers but it could impact British Columbians if foreigners walk away from their deals because of the tax.
He described situations where B.C. residents are fearing property nightmares because they sold to foreign buyers who may now balk at paying the new tax, which in turn threatens to kill the real estate purchases of B.C. buyers.
"So, it can get quite messy and there's a domino effect that could affect a lot of B.C. residents," Morrison said.
Morrison and de Wit said the government should exempt property agreements already in the works before Tuesday's implementation of the tax.
"Any contract that had all the subjects removed and was a firm and binding contract prior to the date of the announcement, should be exempt from the tax," said Morrison.
Premier Christy Clark was steadfast on Wednesday, saying her government will not amend its proposed property transfer tax plan.
"The foreign buyer tax is intended to make sure we can keep home ownership within the reach of the middle class," she said at a news conference in Vancouver. "I make no apologies for that."
All purchasers in the province already have to pay a one-per-cent tax on the first $200,000 of their purchase, two per cent on the remaining value up to $2 million, and three per cent on the portion above that.
In a report Wednesday, Canada Mortgage and Housing Corp. rang alarm bells about Vancouver's real estate sector, increasing its risk rating for Vancouver to its highest level for the first time since it began releasing the reports last year.
