While young people struggle to rent or buy a home in Metro Vancouver, overseas investors are snapping up high-end commercial real estate thanks to a low Canadian dollar and loopholes in the property transfer tax, opposition MLAs say.
Finance Minister Mike de Jong changed the tax rules in his latest budget to exempt buyers of new homes up to $750,000, and increased the rate from two to three per cent for value over $2 million. But the province continues to reap a windfall on resold homes, the vast majority of the market, with one per cent on the first $200,000 and two per cent on value between $200,000 and $2 million.
NDP housing critic David Eby says the tax not only drives up already unaffordable home prices, it can still be avoided by offshore investors buying up downtown Vancouver office towers like the Bentall Centre and Royal Centre.
The NDP and some municipal officials are also calling for a non-resident tax on residential purchases, to deter foreign buyers from buying property and leaving it empty as values climb.
“There is a huge frustration in Metro Vancouver that spreads all the way up to Squamish, where people are tired of the fact that their wages have no connection to real estate prices, and they are fed up,” Eby said.
The province is moving to restore citizenship and residency declarations for real estate purchasers, but de Jong says he needs to collect data to measure the problem of non-resident investors before taking action.
Data are also needed for a commercial property technique developed to avoid the property purchase tax when it was imposed in 1987. A “bare trust” separates legal and beneficial ownership, allowing the property to change hands without paying the transfer tax.
De Jong said bare trusts and share transfers, where the registered owner doesn’t change but controlling interest does, are long-accepted business practices.
“We actually do encourage people to come to British Columbia and invest,” de Jong said. “The purpose here is to ensure that they are paying their fair share, that they are abiding by the laws that British Columbians and Canadians must abide by, and to ensure that we have to make sure we have the information necessary to enforce those rules.”