British Columbia’s new 15 per cent tax on foreign buyers is xenophobic, counter productive to the provincial economy, unfair and disruptive to thousands of Metro Vancouver homeowners and buyers.
But these are not the reasons why this poorly thought-out and politically inspired decision represents a threat to B.C.’s commercial real estate industry.
Under the retroactive foreign buyer tax, which was rushed in August 2 by Finance Minister Mike de Jong with a week’s notice, a 200-unit Vancouver rental building would be taxed the very same as a neighbouring bungalow.
This is simply wrong. It does nothing to help cool Metro Vancouver’s hot housing market – which is supposedly the aim of the tax – and sends precisely the wrong message to the foreign investors so vital to the B.C. economy.
Rental apartment buildings are classified residential by BC Assessments, but they have always been considered commercial real estate because they are income-producing properties.
Just as foreign investors have begun to invest heavily in Metro Vancouver commercial real estate – investors from Germany, China and the U.S. accounted for more than one-third of the $3 billion in sales so far this year – the province has shown it can slant the playing field instantly and without any warning.
If income-generating apartment buildings can be suddenly subject to a hefty new real estate tax, are office buildings, retail malls, industrial property or liquefied natural gas (LNG) plants the next to be hit?
We can image the response from the global resource giants if, with a week’s notice, land costs for a new LNG export terminal were jacked up by millions of dollars.
LandlordBC, which represents about 3,300 owners of residential rental buildings, noted the tax also threatens the delivery of new rental housing, which Metro municipalities have been clamouring for.
“This tax will potentially impede the construction of new purpose-built market rental housing at a time when the need is significant and we are finally starting to see some traction in terms of new construction,” said LandlordBC CEO David Hutniak. He adds, “It is our view that [rental apartment buildings] should be exempt from this 15 per cent tax and we are hopeful that Minister de Jong will seriously consider doing so.”
So do we, but in the politically charged environment that now surrounds B.C.’s housing market such intelligent action appears unlikely.
- Frank O'Brien