A 15 per cent tax imposed on foreign buyers in Vancouver earlier this summer could slowly begin to impact Victoria’s housing market in the coming months, according to a local real estate agent.
Tony Joe, a realtor in Victoria and the president of the Asian Real Estate Association of America’s Vancouver chapter, said so far the implementation of the 15 per cent tax on foreign buyers in Vancouver has had little impact on the local housing market.
However, he believes that will potentially change in the fall.
Since the tax was implemented on Aug. 2, Joe said there has been a scare in Vancouver for buyers and sellers who wrote offers three or four months ago and have closing dates set for September or October.
“They remain uncertain that they’re going to sell because they know that they have a foreign buyer and is that foreign buyer able to get their 15 per cent?” said Joe, who specializes in foreign investors. “When asking buyers ‘are you going to be able to close’? They’re not able to give clarity. It’s a pretty significant grey area right now that are keeping a lot of people on their toes.”
However, if buyers choose to back out before the closing date, both parties will be left in the lurch.
Buyers who back out of the sale because of the tax could face legal ramifications, lose their deposits, which are typically sizeable, or they could be sued. It would also impact the seller, who would need to seek legal remedy.
“The implementation of the tax has really put a lot of people in a bad position,” said Joe. “They purchased with good will knowing what the local requirements are and to have this 15 per cent dropped on them, with no sign at all, especially at that dollar volume, is significant.”
The loss of a sale could also impact Victoria’s housing market.
For example, if a Vancouver resident has decided to sell their home to a foreign buyer and has put an offer on property on Vancouver Island before the closing date on their old home, both sales could be put in jeopardy.
“That is where we would see any sort of trouble. Because we already know, we serve a lot of Vancouverites coming into Victoria. If that influx of investor dollars starts going away in Vancouver, then we’re going to see fewer Vancouverites coming to Victoria.”
While he said it is difficult to pinpoint exactly how many deals are set to close in the fall, based on realtor discussion boards, he said there are “several,” adding he’s heard stories of many people who are reluctant to pack.
In August, the provincial government imposed a new 15 per cent tax on property purchased in metro Vancouver by non-Canadian citizens or residents, in an attempt to deal with the spiralling costs of real estate in the city.
Recent data released by the provincial government said foreigners bought 9.7 per cent of homes between June 10 to July 14 in Vancouver (representing $885 million worth of residential real estate).
The tax does not extend to municipalities outside metro Vancouver, such as Victoria, and will be used to support affordable housing and rental assistance initiatives.
Joe noted he will continue to keep a close eye on the impacts the 15 per cent tax will have in Victoria.