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604.992.1010 | aaron muller |*PREC 

778.386.3765 | michelle anderson | REALTOR® 

The 15% Foreign Buyers Tax Explained...

 

I have had a lot of people ask me about the newly imposed 15 per cent property transfer tax on sales of residential property by foreign buyers that closed and were registered after Aug. 2nd and what effect it will have on the current market.

 

Here are the terms explained:

 

1.  A foreign national is one who is not a Canadian citizen or permanent resident.  If it is company that is purchasing, a foreign company is one that is not incorporated in Canada, or incorporated in Canada but controlled in whole or in part by a foreign national or other foreign corporation;

 

2. The increased tax only applies to properties in the Greater Vancouver Regional District, and does not apply elsewhere in the Province, or the Tsawwassen First Nations Lands (For FVREB, this includes North Delta, Surrey, White Rock and Langley, and NOT Abbotsford or Mission);

 

3.  The tax only applies to residential properties, not commercial;

 

4.  This is in addition to the regular PTT to be paid, and is paid on closing;

 

5.  The increased tax is effective ‪August 2, 2016, regardless of when the contract is signed.  Even if the contract was signed weeks ago, if it completes after August 2, 2016 there is a higher tax;

 

6.  The additional tax is payable even if there would normally be an exemption available.  Transfers between related individuals, transmission to surviving joint tenant and other such items now attract the additional tax.

 

7.  The increased tax is effective ‪August 2, 2016, regardless of when the contract is signed.  Even if the contract was signed weeks ago, if it completes after August 2, 2016 there is a higher tax;

 

8.  The additional tax is payable even if there would normally be an exemption available.  Transfers between related individuals, transmission to surviving joint tenant and other such items now attract the additional tax.

 

Although I feel this will help the affordability of houses in the long run, the fact that this was not made on contracts signed after Aug. 2nd has created a domino effect. Deals have collapsed since the new tax was announced, after buyers failed to finalize deals before Aug 2nd.  This domino effect is hurting Canadian citizens who had sold their property and purchased another only to find that their buyer is walking away due to the new tax.

 

All this doesn’t change the fact that data from the FVREB shows that home sales in the Fraser Valley have been declining before the tax was announced. Sales fell 10.2 per cent in July from a month earlier, and were 31.5 per cent lower than they were a year ago. It was the third month of falling sales in the region.

 

How this will affect the market in the months to come is still yet to be seen. If you would like more information or have any questions please feel free to contact me directly at 604-992-1010 to discuss.

 

Thanks,

 

AA