Jump to content
The Official Site of the Vancouver Canucks
Canucks Community

BC Introduces New 15% Foreign Buyers Tax - Update: Student Files Class Action Lawsuit


DonLever

Recommended Posts

Prices are only rising on lower end properties (condos and townhomes), as well as property outside the foreign buyer's tax zone (Abbotsford, Squamish, etc.).  Metro Vancouver itself is in a freefall in terms of sales, specifically on detached single family homes and more specifically on the higher end product.

 

I checked yesterday and sales of detached single family homes are down around 80-85% in Vancouver West, West Vancouver, Richmond and Burnaby North from the same period in August last year.  As for prices, there could be up to a 20% drop in those areas on detached single family homes in the month of August alone.

 

As for prices still climbing on the lower end stuff, there are still multiple offer situations happening on the lower end because of a lack of inventory.  However, the way it works in every downward cycle is that sales go into a freefall first, which is happening now. Then inventory gets built up and then prices fall, firstly on the higher end stuff and then on the lower end stuff.  There is always a gap between actual sales slowing down and prices falling, usually 2-3 months as inventory builds up.  However right now the prices are actually falling at the same time as sales on the higher end stuff, which most likely means we are in a freefall and a market crash, not a correction.

 

There is a difference of opinion on the Realtor side as to what is happening.  Some feel this is just a blip and things will recover in September as the foreign buyer tax "effect" comes to a conclusion.  Others, like myself, feel that this could be the start of an actual market crash, with a 40-50% price correction a possibility.  Nobody knows for sure what is going to happen, so its all speculation at this point.  But the fact that I've been in the real estate industry and first licensed since 1993 while ALOT of current Realtors have only been in the business less than 5 years and have never seen an actual price correction, this to me looks eerily similar to other corrections I have seen since the 1990's.

 

As for the foreign buyer's tax, which most people thought wouldn't have much of an effect on sales or prices, we were all wrong apparently.  I think the biggest reason why we were wrong is that we didn't expect everyone to go into a state of panic like people are doing right now.  Remember people buy and sell real estate based on emotions not logic.  Fear, panic, anxiety and anger is all prevalent right now with buyers and sellers.  And some Realtors are now advising their clients to sell now rather then wait it out as prices could drop significantly.  Also, buyers are all in a waiting period, as they are now thinking why buy now if I can get that same property for 20% less in 3 months.  So basically the pendulum has shifted, whereby supply is now going to increase while demand is going to drastically decrease.

 

Christy wanted to slow down the market.  Well that foreign buyer's tax certainly did the trick.  However, in her haste to get the tax out as quickly as possible over a long weekend and not grandfathering the tax for legal and binding contracts already signed up, she has created mass hysteria and panic in the market, which ultimately may lead to a market crash.  This is NOT good news for the economy, as it could cause massive inflation and unemployment, resulting in our economy going into a massive recession.

 

In any event, the damage has already been done, there is no turning back now.  Once the official numbers come out for August in a week's time we will know what we are facing moving forward.

Link to comment
Share on other sites

7 minutes ago, Harvey Spector said:

Prices are only rising on lower end properties (condos and townhomes), as well as property outside the foreign buyer's tax zone (Abbotsford, Squamish, etc.).  Metro Vancouver itself is in a freefall in terms of sales, specifically on detached single family homes and more specifically on the higher end product.

 

I checked yesterday and sales of detached single family homes are down around 80-85% in Vancouver West, West Vancouver, Richmond and Burnaby North from the same period in August last year.  As for prices, there could be up to a 20% drop in those areas on detached single family homes in the month of August alone.

 

As for prices still climbing on the lower end stuff, there are still multiple offer situations happening on the lower end because of a lack of inventory.  However, the way it works in every downward cycle is that sales go into a freefall first, which is happening now. Then inventory gets built up and then prices fall, firstly on the higher end stuff and then on the lower end stuff.  There is always a gap between actual sales slowing down and prices falling, usually 2-3 months as inventory builds up.  However right now the prices are actually falling at the same time as sales on the higher end stuff, which most likely means we are in a freefall and a market crash, not a correction.

 

There is a difference of opinion on the Realtor side as to what is happening.  Some feel this is just a blip and things will recover in September as the foreign buyer tax "effect" comes to a conclusion.  Others, like myself, feel that this could be the start of an actual market crash, with a 40-50% price correction a possibility.  Nobody knows for sure what is going to happen, so its all speculation at this point.  But the fact that I've been in the real estate industry and first licensed since 1993 while ALOT of current Realtors have only been in the business less than 5 years and have never seen an actual price correction, this to me looks eerily similar to other corrections I have seen since the 1990's.

 

As for the foreign buyer's tax, which most people thought wouldn't have much of an effect on sales or prices, we were all wrong apparently.  I think the biggest reason why we were wrong is that we didn't expect everyone to go into a state of panic like people are doing right now.  Remember people buy and sell real estate based on emotions not logic.  Fear, panic, anxiety and anger is all prevalent right now with buyers and sellers.  And some Realtors are now advising their clients to sell now rather then wait it out as prices could drop significantly.  Also, buyers are all in a waiting period, as they are now thinking why buy now if I can get that same property for 20% less in 3 months.  So basically the pendulum has shifted, whereby supply is now going to increase while demand is going to drastically decrease.

 

Christy wanted to slow down the market.  Well that foreign buyer's tax certainly did the trick.  However, in her haste to get the tax out as quickly as possible over a long weekend and not grandfathering the tax for legal and binding contracts already signed up, she has created mass hysteria and panic in the market, which ultimately may lead to a market crash.  This is NOT good news for the economy, as it could cause massive inflation and unemployment, resulting in our economy going into a massive recession.

 

In any event, the damage has already been done, there is no turning back now.  Once the official numbers come out for August in a week's time we will know what we are facing moving forward.

Great comment.  

 

Things I noted.

 

The "lower end" properties you speak of, are the only affordable properties and they're still seeing a month by month increase of 5% or higher and that number is climbing as more of these units disappear.

 

The detached home and lot properties are almost non existent for inventory yet prices are in fact still climbing which is normal as inventory has dried up, valuable goods and a scarcity of availablity leads to increases.  Always has, we won't see any serious price drop of any significance until the usual slow down of Oct through March imo only and even then they'll call a 10% correction precipitous

 

As a long standing realtor, do you honestly see a 40% to 50% correction as possible?  And even then doesn't it still leave a lot of these properties and micro units slightly overvalued compared to inflationary rates?

 

I and most others actually fully expected said "panic" to set in.  Watch and wait, the tax hit.  People purchased homes as investments, they only own them to make money.  Buy a $1.2 million shack and watch it turn in to $1.5 million overnight, sell it park the money back home where it is perfectly clean safe and legal.  They all waited and are in large cases as evidenced by a lack of inventory still waitint for the chance that prices will keep climbing based on demand.  But that demand is also not happening as the entire market is frozen at a standstill

 

Foreign owners want to make $, local buyers can't afford it.  They will sit trying to realize their return and locals will not be able to make enough to purchase at the prices they want  Canadian stand off.  Until the first blip of 7$ to  10% drops actually happen in which case the flood of property on to the market at outrageous prices will happen.  Should that occur at those unaffordable prices I think maybe your 40% to 50% is possible

 

I still think we've not seen the end of this.  Due to NAFTA and due to Harpers Canada/China free trade agreement the BC government is about to get their arses handed to them in court by "investors" who stand to lose money or will claim are being unfairly shut out of the market.  the ONLY hope is to either appease them now before the lawsuits start totalling the tens of millions in court costs or more, finaggle the lettering in BC terming that "homes are homes and not investments" which raises a HUGE host of other issues or to drop the tax entirely.

 

One week or so to go.  Should be interesting

 

 

Link to comment
Share on other sites

In my own opinion a 40-50% price correction is plausible. It may not happen but nobody knows at this point.  One thing is for certain the market has "stalled" completey. Whether that trend continues into September we won't know for another month. 

 

A 40-50% price correction, or market crash, would put us into prices not seen since around 2010. So that's 6 years of gains wiped out. And you have to remember that in 2010 we were just getting over the 2008 market crash and prices  were just getting back to pre 2008 numbers. So in fact we'd be back all the way to the summer of 2008 with a 50% price correction. In terms of inflation, that would mean around an 8 to 1 income to price ratio, which is normal. We are something like 12 to 13 to 1 right now which is unheard of.  Also you have to remember that if the market does crash, the Bank of Canada would step in and use monetary policy to try and fix the mess. Not to mention banks tightening their lending guidelines in order to cover themselves for defaults. The banks are already doing stress tests to see if they can withstand a 50% market collapse. Of course then you'd have rising unemployment with all the people in the real estate sector losing their jobs.  Plumbers, electricians, carpenters, contractors, everyone that works on housing and development basically. Once developers stop building and people stop renovating, unemployment will skyrocket. 

 

Its too too early to tell what will happen, everything at this point is speculation.  But Christy has caused quite a stir right now. Yes you may have thought panic would kick in with the tax, but it's more then that. The kicker was when she did not grandfather existing deals. That caused a ripple effect that is still prevalent. Over 500 deals may have collapsed. And those are not just foreign buyer deals, those are also deals that locals had locked up but then they collapsed because they were part of a string of other deals that collapsed. Then you had all the people who had offers in and accepted but didn't bother to remove subjects and walked away because their thinking is wait a few months to get a better deal. We don't even know how many of those collapsed deals transpired. 

 

August numbers are gonna be gruesome. By my calculation the detached home sales are down 80%. And the prices look to be off by 20%. So there already has been a price correction on the high end stuff. That will eventually trickle down to the lower end stuff over the next few months as buyers wait on the sidelines and sellers panic and put their places up for sale. Increase of supply and decrease of demand in all areas will eventually affect even the lower end market and the markets outside the tax zone. 

 

Yes I think there are going to be major lawsuits happening with this foreign buyer's tax. This thing is gonna get ugly. It could last for years in a major court battle. Unfortunately the market may crash before the lawsuits are settled so the damage will already have been done. I think we are in for a rough ride these next 6-12 months. The economy may take a massive hit. It won't be pretty. You cannot have a severe real estate market correction or crash in a short period of time without major economic repercussions. It's gonna get ugly. I doubt Christy gets re-elected. I'd be shocked if she does. There will be too much carnage before the next election for the Liberals to save themselves from this mess. 

Link to comment
Share on other sites

From CKNW:

 

It’s the first legal challenge of the B.C. Liberals foreign buyer tax – a class-action lawsuit has been filed in B.C. Supreme Court.

Lawyer Luciana Brasil alleges the tax discriminates against foreign buyers and violates over 30 international treaties.

“And those treaties include provisions that say contracting countries are not to give their citizens or nationals any treatment that is more favourable than those of the other countries. These persons just because of their nationality are now having to get a treatment that is less favourable than a Canadian buying the exact same property.”

 

Brasil says the lead plaintiff is a Chinese University student who is forced to pay $84,000 in additional tax.

She bought a $560,000 dollar home in Langley and could lose her down payment if she doesn’t come up with the additional tax.

“The province here chose to impose the tax based on nationality and country of origin, and that’s essentially an area of federal jurisdiction so they shouldn’t have been able to do that

 

Link to comment
Share on other sites

On 8/27/2016 at 0:14 PM, Harvey Spector said:

 

 

Yes I think there are going to be major lawsuits happening with this foreign buyer's tax. This thing is gonna get ugly. It could last for years in a major court battle. Unfortunately the market may crash before the lawsuits are settled so the damage will already have been done. I think we are in for a rough ride these next 6-12 months. The economy may take a massive hit. It won't be pretty. You cannot have a severe real estate market correction or crash in a short period of time without major economic repercussions. It's gonna get ugly. I doubt Christy gets re-elected. I'd be shocked if she does. There will be too much carnage before the next election for the Liberals to save themselves from this mess. 

I'm not sure I agree with the downturn killing the economy as a whole. Vancouver's greatest issue is that price real estate and living keep people away. 

 

A real estate crash could result in a dramatic and immediate rise in other industries. The same thing happens when the dollar goes low. All of a sudden every film-maker in America wants to come to Vancouver. 

 

Lower prices could also stimulate construction and development. If an old lot on the East side can be had for a more reasonable price, a developer may be more likely to build a condo complex on it or a family may be more likely to renovate. 

Link to comment
Share on other sites

27 minutes ago, DonLever said:

From CKNW:

 

It’s the first legal challenge of the B.C. Liberals foreign buyer tax – a class-action lawsuit has been filed in B.C. Supreme Court.

Lawyer Luciana Brasil alleges the tax discriminates against foreign buyers and violates over 30 international treaties.

“And those treaties include provisions that say contracting countries are not to give their citizens or nationals any treatment that is more favourable than those of the other countries. These persons just because of their nationality are now having to get a treatment that is less favourable than a Canadian buying the exact same property.”

 

Brasil says the lead plaintiff is a Chinese University student who is forced to pay $84,000 in additional tax.

She bought a $560,000 dollar home in Langley and could lose her down payment if she doesn’t come up with the additional tax.

“The province here chose to impose the tax based on nationality and country of origin, and that’s essentially an area of federal jurisdiction so they shouldn’t have been able to do that

 

That is categorically untrue which is why she'll lose this aprticular case.  Citing racism is not a viable reason when it encompasses EVERYONE.

 

But should it be challenged under NAFTA or the China/Canada trade agreement, then there is grounds for a loss.

 

Either way it's going to cost taxpayers millions in court costs

Link to comment
Share on other sites

24 minutes ago, DonLever said:

A better question is how can a student afford to buy a house for over $500,000?   A typical student is usually over their head in debt.

 

I don't think too many people feel sorry for this student.

Exactly. If she were truly a 'student' then renting or campus housing would suffice. The need to own here is for investment purposes only. 

 

I also have problems understanding why a Chinese citizen feels she has Canadian citizen rights. 

 

Anyways, looks like Ontario is taking similar measures: 

http://www.cbc.ca/news/business/benjamin-tal-housing-cibc-1.3769153

 

Quote

A prominent economist says that Ontario will have little choice but to implement a tax on foreign house buyers, similar to the 15 per cent surcharge recently slapped on home purchases in Vancouver. 

In a recent note to clients, Benjamin Tal of CIBC says the biggest problem facing policymakers with regard to hot housing markets in Toronto and Vancouver is a limit on the supply of new homes.

In both cities, there's a lack of undeveloped land to build new real estate in the downtown core.

"The main reason behind higher prices in the [Greater Toronto Area] is a policy-driven lack of land supply," Tal said. "And with no change on that front, policymakers have to use demand tools to deal with what is essentially a supply problem."

Influence of foreign buyers

One such tool is already underway in Vancouver.

Vancouver's housing market had been showing signs of a slowdown before the city's move in July to implement a 15 per cent tax on housing purchases by foreigners "pushed it over the edge," as Tal puts it. According to the Real Estate Board of Greater Vancouver, house purchases declined by 26 per cent in August compared with the same month a year earlier.

Another subsequent move, to tax vacant homes, is likely to pour more cold water on a housing market that was red-hot for more than a year.

A steep decline in prices may be jarring to recent buyers, but it's exactly what B.C. policymakers are hoping to accomplish, at least in the short term.

CANADA-HOUSING/

High housing prices have become a contentious issue in Vancouver, leading to protests. (Jim Jeong/Reuters)

"Ontario will have little choice but to do the same," Tal said.

That's because the Vancouver tax has had the unintended consequence of inflating bubbles elsewhere.

There's anecdotal evidence that Vancouver's tax has already shifted foreign money to Toronto housing, and media reports suggest some of the money that was pouring into Vancouver has been redirected to Seattle.

High-end real estate seller Sotheby's says it expects a lot of demand in Vancouver's luxury market to move to Toronto.

Other options

Tal doesn't speculate how much of a tax could be under consideration for Toronto, nor does he have any insight as to when and how it might be implemented.

A foreign buyer tax is not the only possible response to the problem of high house prices. Among other possibilities, Tal cites:

  • Compelling banks to tighten their lending practices by making them pay for their own mortgage insurance.
  • Raising the down payment minimum to 10 per cent, even for homes under $1 million,
  • Closer monitoring of lending to subprime buyers.
  • Offering tax incentives to developers to make more purpose-built rental buildings, including more flexible rent control rules, as ways of cooling Toronto's housing market.

Tal says Toronto's housing market has been inflated by cheap lending to people who would have no business getting a mortgage if rates returned to more typical levels.

But higher interest rates could mean borrowers would just have to spend more to pay down their debt, which would give them less to spend in the real economy, possibly sparking a recession, Tal warns.

It may be too late to stop cash-tight borrowers who have already bought, but a tax on foreign buyers would help cool the market in the right way.

"Any upcoming changes to regulations," Tal says, "should make it a bit more difficult to borrow — simply to save Canadians, blinded by the current affordability mirage, from themselves."

 

Link to comment
Share on other sites

http://vancouversun.com/business/real-estate/global-destinations-that-impose-tax-on-foreign-buyers

 

For anyone hoping the tax will be challenged by international courts...forget about it. Vancouver was not the first place to institute a tax or other restrictions on foreign buyers. You'll also notice that Vancouver's tax does not apply to commercial properties. 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...