Canada’s foreign real estate buyers tax won’t be a long term deterrent
Royal Bank of Canada says Vancouver will still attract wealthy foreign investors
By Emma Crawford Hampel
The 15 per cent tax on foreign real estate buyers enacted this summer has dampened foreign interest and will continue to do so in the short term, but Vancouver will remain attractive to investors from other countries, according to an RBC Economics report released.
The report said once the initial shock from the tax has run its course, the city will continue to attract wealthy individuals, particularly from China, “given the strong connection already established.”
“Vancouver offers a sought-after lifestyle and prestige for wealthy Chinese that only a handful of other international cities can boast,” the report said. “These cities include Hong Kong, Singapore, Sydney, Melbourne and London, all of which impose some form of restrictions on foreign buyers.”
Some examples of these restrictions include a special stamp duty or capital gains tax for foreign owners.
The tax did work to cool the market over the summer; data published by the provincial government September 22 showed the percentage of Vancouver home sales that involved foreign buyers fell from just over 13 per cent between June 10 and August 1 to 0.9 per cent between August 2 and August 31. Just how long this impact will be felt is unknown.
In addition to foreign buyers, wealthy immigrants, who are not subject to the 15 per cent tax, will continue to play a strong role in the market, RBC said. Their impact is more likely to be felt at the higher end of the market.
“High net worth individuals are drawn to Vancouver for the same reasons as foreign investors, as well as other factors such as good schools, clean environment and the ‘global passport’ that Canadian citizenship offers.”