Vancouver’s 15% Non-Resident Investor Tax To Boost Toronto Market

Three hours ago the Globe and Mail reported reported that the British Columbia Government has elected to impose a 15% tax on buyers of Metro Vancouver residential properties starting August 2nd, 2016.

The tax will apply to buyers who are not Canadian citizens or permanent residents, as well as corporations that are either not registered in Canada or controlled by foreigners.

The province does however have the flexibility to vary the tax from 10-20% depending on the deal. This is likely the biggest change a regulator has made in an attempt to cool an incredibly intense market. Having to pay an additional $150,000 for a $1mm property ($300K on $2mm and so on) could drive investors to other markets like ours here in Toronto. This move will also allow Municipalities to impose a Vacancy Levy on investor owned homes which remain unoccupied.

With home prices in Metro Vancouver gaining over 30% in the past year, this is Premier Christy Clark’s attempt at curbing the market to provide more affordable housing for the middle class (which is complete BS.) Rather than find a way to provide more affordable housing options for the middle class, the province has simply found a way to profit off of investor money. This move will do nothing for the middle class.

This new and insane land transfer tax will certainly drive investor money out of the province into other Canadian markets but will also fuel investment in Vancouver commercial properties and other non-residential real estate. I’m also fairly certain that Non-Resident investors will find ways to keep their money in residential real estate by focussing on surrounding Vancouver communities like Burnaby, New Westminister, Richmond and Port Coquitlam to name a few. If I were investing in Real Estate, I’d put my money in those communities. Helping the middle class, eh? No, you’re even going to push out the middle class in those other communities as prices rise there too.

There’s nothing the feds can do (without completely crashing the economy via rate hike) to help the middle class afford homes. Over the next decade we’ll see a huge spike in creative home ownership with a rise in co-ownership (two families under one roof), multi family homes and families becoming more comfortable with smaller spaces if they want to stay closer to the urban City Centres. This is just a reality of big city living.

What does this mean for Toronto? Hold on to your hats, folks because money is about to come pouring into Toronto.

Non-resident purchasers are going to be looking to put their money in a more investor friendly environment. Toronto happens to be the most diverse City in the World so naturally, we’re next.

How’s the Toronto market now?

Many don’t realize how intense the Toronto market has become. There are Real Estate agents and investors literally flipping properties before closing for a quick $50-100K profit daily. For example: We sold a property two months ago to a Realtor, we then found out that just before closing he flipped it to a colleagues’s client for a $50K profit.

Another agent commented on a local real estate thread:

In our office, we have Canadians assigning APS agreements a month before closing at a price of $100k more then when the agreement was written. The distortion is coming from all angles! 

We’re seeing this on the ground now and it’s going to get worse (I guess better if you’re a property owner) before it gets better. If you’ve been in the market  and just haven’t quite pulled the trigger on the property. It’s time. Toronto real estate isn’t going to get cheaper any time soon. Need help? Email us.