self serving article by
Julie Di Lorenzo who is the president of Diamante Urban Corp., a real estate development company.
for years, many developers and realtors stated that foreign buyers are minimal in pre-construction sales, i.e. 5 to 10% of sales.
if they were truthful and accurate, then why the huge push back that would only affect a minimal number of units/sales??
Foreign buyers are helping to increase the supply of condominiums because the industry standard requires them to make a 35 per cent down payment, whereas local buyers are allowed to put down as little as 5 per cent. In effect, the investments from foreign buyers are pushing the projects ahead. But if they are faced with a 15 per cent surtax, they may decide to move their money elsewhere.
local buyers are typically required to make a 25 % down payment - 5% in 30 days, 5% in 180 days, 5% in 365 days, 5% in 540 days and 5% on occupancy.
as little as 5 % down payment typically occurs on remaining inventory units when a condominium project is near completion
If affordability of housing is the issue, then the B.C. tax will make the situation worse, not better, by hindering condo developments that provide local buyers with affordable alternatives, priced under $500,000. Even CMHC notes that individual investor condominium purchases have alleviated the pressure on the tight rental market. Arguably, this opens up more locations and unit types as rental inventory than a purpose-built rental would.
current dt residential condominium prices are ~$750+ psf; which is highly over priced
RETAIL cost for hard construction per Insurance Bureau of Canada and Altus Group (for structure and mid-range finishes, which most are) is ~$250-300 psf (excluding land); so it is much cheaper for developers who also have economies of scale. their cost is closer to ~$170-200 psf
land value is not as expensive or large a component of price when many high-rise projects are built at 30x lot area.
There is also a fairness issue involved with the B.C. tax, as it is effectively retroactive. It will be imposed at the time of closing, from Aug. 2 on. In the condo sector, sales agreements are struck well before closing — often two years or more. These deals were entered into in good faith by investors, who are now being told they will have to pay an extra 15 per cent at closing. That is punitive.
hmmm ... funny we don't hear the same type of concern from developers when they pass $10,000+s unexpected costs onto buyers. I've heard story where buyer of 1 bedroom unit received $50,000 bill upon closing for inflated development fees and the developers lawyers' legal fees, etc.
Finally, the B.C. tax is likely in violation of our international obligations. “NAFTA and other Canadian trade agreements prohibit governments from imposing discriminatory policies that punish foreigners while exempting locals,” notes Appleton & Associates, a respected Toronto law firm. “Under NAFTA, citizens forced to pay the 15 per cent penalty ... are entitled to obtain direct compensation from an independent tribunal for B. C. s discriminatory tax.”
Considering many of those nations have their own restrictive foreign ownership policies, then we should do the same and forego the tax if it is discriminatory.
http://www.cbc.ca/news/business/real-estate-housing-foreign-buyers-1.3479508
http://www.macleans.ca/economy/econ...rest-of-the-world-limits-foreign-home-buyers/
https://betterdwelling.com/city/toronto/7-places-tax-foreign-property-investors/
China
Having a population of over a billion people would put any country in a housing crisis, so it’s no surprise there’s a lot of property rules in China – including ones that target domestic owners. Foreigners are allowed to purchase only one property for their own personal use, after having spent one year in the country. After that, if you become a permanent resident, you’re allowed to purchase one additional property for personal use.
Thinking of skirting the restriction using a shell company? Not so fast, the Chinese government conducts regular audits and foreign companies must use the property they reside in, or risk having it taken away.
Australia
The Australian government recently appointed a Foreign Investment Review Board to review and approve purchases of residential homes in the country, amid growing concerns that non-residents were driving up prices. The criteria for approval of these residential purchases is murky, but the board isn’t just for show. They have forced the sale of 27 homes, investigated the purchase of 1,300 properties to date, with another 800 on the their list to go.
United Kingdom
In 2014 a study revealed that 50,000 homes in London were sitting empty, while Londoners were struggling to find affordable housing. There was a lot of discussion on how to best handle the issue, but it wasn’t until last year that they took the first step in actually aiming to curb it. In April of 2015 they passed a law levying a new tax requiring up to 28% of the sale of the property be paid to the government – in June of 2015 they saw one of the largest declines in UK housing prices in months… I’m sure that’s just a coincidence right?
Switzerland
The Swiss have always had strict rules regarding housing, especially foreign ownership, with each canton (that’s a township if you’re not French-Canadian) assigning annual quotas and requiring approval before being sold to foreign owners. If approved, you can use it as a personal residence only, so forget your dreams of being a landlord in Switzerland.
Fun fact, not even the Swiss are allowed to build homes over 1,000 sq. m. without a special permit – so there aren’t a lot of Bridle Path style houses to choose from. Sad, I know.
Mexico
Mexico established a law in 1917 prohibiting foreign ownership of land within 50 kilometers of the coast or with 100 kilometers of an international border – out of fear that Americans would flood their border (they should have built a wall and made the Americans pay for it). Despite this, a constitutional amendment made in 2013 allows the purchase of land through a legal loop hole called a fideicomisos (trust) ownership, where the bank holds the deed to the property and the foreign owner renews the rights to the land every 50 years.
Hong Kong
Hong Kong’s always been a dense city, but it wasn’t until 2010 that they started to really tackle the problem of foreign ownership. Non-residents pay an ad valorem tax that starts at 1.5% on properties under HK$2,000,000 (CA$300k), up to 8.5% HK$20,000,001 (CA$3.3M). Additionally there’s a 15% “Stamp Duty” on the purchase of land. A tax of 10-20% is also levied on anyone that sells a property less than three years after purchasing, effectively preventing flipping. That’s probably why we’ve never seen Flip or Flop Hong Kong.
Canada
Yes, foreign ownership restrictions exist in Canada already. Well, kind of. In PEI any non-resident (this includes us in Toronto), can’t purchase more than five acres of land, or more than 165 feet of coast land. While not terribly restrictive (unless you want to build a coastal mansion for a retreat), this does serve as an existing framework to look at.
Additionally Alberta, Saskatchewan, Manitoba, and Quebec have restrictions on the purchase of farmland by non-residents.
