The B.C. government is imposing a new 15 per cent tax on property purchased in Metro Vancouver by non-Canadian citizens or residents.
The tax is to take effect Aug. 2, Finance Minister Mike de Jong told the B.C. legislature Monday at a special session called to deal with the spiralling cost of real estate in parts of urban B.C. The tax does not extend to municipalities outside Metro Vancouver, but could be amended to include those later.
De Jong said revenue from the tax will go into a new provincial fund to provide rental and social housing. Some revenues from a recent increase in B.C.'s property transfer tax on high-end homes may also be directed to the "housing priority initiatives fund," which is being started up with $75 million in seed money from the provincial treasury.
The new 15 per cent rate on the property transfer tax will be imposed on purchases by foreign nationals and foreign controlled corporations, intended to discourage investment by non-residents.
In the budget in February, de Jong increased the property transfer tax to three per cent on value of homes more than $2 million, and raised the exemption level to $750,000 for the purchase of new homes, in an effort to encourage new supply.
The property transfer tax continues to apply at one per cent on the first $200,000 of resold homes, and two per cent on value between $200,000 and $2 million. It has produced a windfall of revenues to the province in a hot real estate market in southern urban areas.
Premier Christy Clark said there will be more details in the coming months on how the province will use the new housing fund. She said the 15 per cent foreign buyer tax was chosen after examining similar taxes in Singapore, Hong Kong, London and Sydney.
"There is evidence now that suggests that very wealthy foreign buyers have raised the overall price of housing for British Columbia," Clark said. "And if we are going to put British Columbians first, and that is what we are intending to do, we need to make sure that we do everything we can to try to keep housing affordable, and to try and make sure those very wealthy foreign buyers find it a little bit harder to buy a house in the Greater Vancouver area."
NDP leader John Horgan said the province needs to use income tax data to determine whether home buyers are paying tax in Canada, rather than impose rules on foreign nationals.
"Much of the investment that's happening now in the Lower Mainland is being directed by cash from somewhere else, by people who are already here," Horgan said.
NDP housing critic David Eby said a foreign investor could avoid the tax by setting up a Canadian company to buy real estate.
The housing legislation introduced Monday also imposes new regulation on the B.C. real estate industry, replacing self-regulation with a new Real Estate Council appointed by the provincial cabinet.