The recent announcement of an additional 15% property transfer tax took Vancouver by surprise. This legislation was introduced to create new measures to combat a lack of affordability by honing in on foreign investors. Since the imposed tax there has been confusion around what exactly this legislation means, who it will impact and why this bill was passed.
Retroactive Application
What this means is as of August 2nd, 2016, a 15 percent tax will be added to the purchase price on all homes both attached and detached, pre-sale and re-sale at the time when the land title changes ownership. Moreover, homes sold prior to this legislature will be taxed retroactively, without exception. For example, a pre-sale home that was purchased 2 years ago and set to complete next month would also be required to pay the additional 15% tax.
Tax Applies to Foreign Citizen Buyers within the GRVD
Taxable home buyers include all non-Canadian citizens, in other words those who do not have a SIN card or Canadian Passport. This additional tax is only applicable on homes located in the Greater Vancouver Regional District (GVRD). Essentially from Lions Bay to Langley and all cities and districts in between.
Effect on Affordability
Affordability has long been a topic of discussion as housing prices in the GVRD have continued to climb to all-time highs. This legislation was put in place as an effort to make home ownership more affordable, strengthen local consumer protection, as well as establish a fund for market housing and rental initiatives. Since the announcement of this bill there has been much discussion from both inside the real estate industry and the general public. Although there are some differing opinions on the trickle-down effect of this new legislature, there does seem to be a consensus that this alone will not have the desired effect. In order to truly deal with affordability there are a multitude of strategies which would need to be put in place and none more important than the increase in supply of housing. Having said that, we will be able to assess the impact and the effectiveness of this new legislation in the ensuing months.
