Vancouver Moves Towards Taxing Absent Home Owners
Vancouver Moves Towards Taxing Absent Home Owners
“Real economic stimulus comes from real investment” – Tim Bishop
Vancouver is quickly moving closer to implementing a tax on properties that are left vacant for 12 months or longer. In fact, BC Finance Minister, Mike de Jong, will be hosting a meeting on July 25th to discuss how the taxation rules for Vancouver can be amended to permit this tax. According to the latest Teranet-National Bank House Price Index, house prices in Vancouver have increased by 23.4% since last year.
In 2013, a Vancouver housing researcher, Andre Yan, sparked a firestorm of controversy when he stated that at least 25% of downtown Vancouver condos were either not occupied or occupied by non-residents for a fraction of the year. Meena Wong introduced this “tax concept” during her mayoral campaign. Vancouver is not alone in contemplating this “surcharge” as Britain has permitted councils to impose up to 150% of the tax rate for an owner leaving a property empty for more than two years. The Guardian newspaper reports that 70% of housing in central London is being purchased by foreign investors.
An article in The New Yorker reported that Vancouver, not New York, is actually the most expensive housing market in North America according to James Surowiecki. The same article contains an interview with Bing Thom Architects urban planner Andy Yan, who says “Vancouver has become a ‘hedge city’ where wealthy foreigners park their cash in a politically stable and comfortable city where they feel safe to invest in homes they may use only sporadically. As word spreads about the city, more of the global super-rich move in and gobble up properties from real estate developers who are more than willing to sell at highly inflated prices.”
There is really 2 sides to this argument. Are absentee owners responsible for paying to ensure that large cities such as Vancouver can offer affordable housing? What about the rights of a property owner to use their property as a “recreational property” when they visit Vancouver? Real estate investors would likely vehemently oppose this tax as it would affect their ability to sell a property quickly if a tenant was required to reside in the property, even if the proposed tax requirement was that the property was vacant for a minimum period of one year.
Many citizens look at immigration reform as a necessity, rather than simply adding a tax surcharge for vacant dwellings by non-residents. Online bloggers are quick to point out that it makes sense to support the needs of local residents as they contribute to the economy through their skill set and tax contributions. Others are quick to reference that the origin of the money used to purchase these properties by non-residents is suspect, and argue that many of these foreign buyers are engaged in money laundering or other illegal means of purchasing a home that Canadian citizens might be looked at a little more closely. Recently, there have been several news stories about students purchasing multi-million dollar homes with no proven income in Vancouver.
It seems clear to me that this issue will not go away anytime soon. With prices sky high in Vancouver, I honestly don’t know what the solution is. Nanaimo’s real estate market is much different, with our average sale price of a single family home much more aligned with the country’s median price. We do see foreign investment, but not the degree that Vancouver is experiencing. Nanaimo’s rental vacancy rates are nowhere near 25%, so we are much more isolated from this issue as well. I think that as our global economy and communications transform, our real estate policies will change as well.
For me, real estate is a tactile investment for me. I like to touch it, see it, feel it, or live in it as is the case presently for Johanna and I. I would not want to have any property that I own vacant for any length of time, but this is largely due to the fact that in my 35 years as a professional realtor, I have seen structural damage, flooding and other issues occur in homes that are not occupied that can cost thousands of dollars when it comes to sell. For me, I take great pride in anything I own, and would never consider leaving a property vacant. I was cautioned a few years ago by a financial professional to never buy property outside of North America because a country’s government can implement rules and fees for foreign owners without much notice and it can be difficult to sell as a result. It would seem to be sage advice even today.
Brian McCullough, Myles McCullough & Kiel Lukaniuk
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