It was implemented poorly last time, and it’s being implemented poorly this time.
Both political parties completely missed the mark on an effective measure.
Increasing an ineffective tax is weak willed – why not simply limit ownership?
i.e. One property per individual.
Please understand that I don’t work with foreign buyers, and this post is not in defensive of. Rather my frustration is with a (retroactive) policy that clearly does not impact out market.
February 2018 has kicked off with many multiple offer scenarios as far east as Langley.
Again, to be clear, the words that follow are not meant to defend ‘foreign’ buyers (I’ll save that topic for another day). Instead this post is meant to highlight the moronic posturing, pandering, and political stupidity of both the past party in power and the present on this topic. Each party has now proven to have no genuine interest in stemming the flow of outside capital into BC real estate. The gov’t simply want to capture more of those foreign dollars. Which does little for you or I, or our children.
I’m truly equal opportunity on this one, which is to say equally disappointed. The Liberals’ introduction of this tax, specifically the methodology and rationale, was nothing short of a disgrace with it’s complete disregard of the ‘good faith’ component of contract negotiation. The NDP has lazily taken a page out of the Liberals’ playbook and effected a weak-willed tweak to an ineffective tax. Both parties appear to suck equally when it comes to grasping an obvious and simple solution to this issue.
Part 1 – The 15%
The ‘original’ idea was that a 15% tax, (What does it mean to be CDN?), would slow down wealthy speculators parking their money in Vancouver real estate. Such short-sighted thinking that a price increase for one group, would automatically ‘make it cheaper for the other group’ is a clear indication of how detached from basic realities our government officials are.
But then again, we don’t hire politicians based on facts or skill; many a study has proven that we hire them based on popularity and sentiment.
Let’s pause for a moment and think; in a market that had shot upwards by 33% in a single year, and was still subject to multiple condition-free ‘cash’ offers, why on earth would a 15% increase slow people down? Thirty-three percent did not slow them down. And sure enough, six months later we were off to the races again.
Part 2 – The next 5% – a missed opportunity
And now we see an increase in the tax from 15% to 20%. Really? Oh that’s gonna do the trick for sure. Cheap houses for all, here we come! Not so much.
Why not a more logical and effective measure, say a limit of one property per individual?
Would this not limit the impact a handful of deep-pocketed speculators could have?
One of our mistakes, collectively, is believing that a foreign investor buying eight or ten 2M$+ homes is focused on ROI – return on investment. The mistake is to think they are ‘speculating’. Most are not. The majority, especially those from less stable countries around the world, are interested in little more than simply securing a safe return of their investment.
Return of capital.
Not Return on capital.
Say what you will about bubbles (there isn’t one) but most humans the world over are far more comfortable parking their family fortune in Vancouver real estate than they are in Bitcoin, mutual funds, or gold bars. It just feels safer somehow. No doubt rule of law, property rights, human rights, freedom of expression, etc. all play into that feeling.
The one property per individual concept would be simple to implement, easy to track through BC Online and the Corporate Registry, and would slow certain parts of the market down, perhaps even easing prices.
Limiting demand by increasing taxation is a typical government response. And we’ve seen how well that worked. It is a policy that has been, and will continue to be, ineffective in solving the actual issue. It will create pain for many middle-class families, for Canadians working abroad even just temporarily, and for immigrants on the cusp of Permanent Resident status or citizenship. This path of increased taxation will leave us no better off five years from now.
Increase supply – that is what makes anything less expensive.
The alternative to increasing supply, control demand – but with a measurable method. Remove buyers not by taking a guess at how much they might pay, remove them by limiting how much of the supply they can consume.
Have a great day!