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The new foreign property tax: Our Brexit?

July 29th, 2016 · 10 Comments

Is this tax, which I’m told the province decided to implement after looking at some pretty disastrous polling stories three weeks ago, really our version of Brexit?

Could it be our (tamer) version of the British vote where people rebelled against the prevailing tide of globalization favoured by governments and the corporate world?

(I’m not going to bother linking here to all the stories documenting the ripple effects of this tax that have unfurled in the last four days. I presume anyone here as seen them all and there are far too many. Stories about many people who had bought in pre-sales caught by this, from students due to arrive from India to Americans who had accepted jobs here. Letters from construction companies and developers about the dire impacts they are seeing. This morning, people opining that this violates NAFTA. But, wow, what a drama. A tragedy for some but, I have to say, a gift for reporters.)

 

Categories: Uncategorized

  • Kirk

    Oh gawd. Are we seriously trying to divide up opinions into two simplistic camps now? So, people on the 15% tax side are anti-globalization Bernie Sanders supporters? And, people against the tax are 1%, big bank, Wall Street supporters? Seriously? We’re spinning it like this now?

    Almost half of Vancouverites are international immigrants, and way more than that are non-Vancouver born. So, I don’t think anyone is trying to build a wall. And, polls are saying 90% support the tax. So, there’s no big split in the general population. People are not not anti-anything. They just want affordable housing. This tax is just the tool that the Province happened to implement first. They’re trying to decrease speculative demand. They’re also trying to increase housing supply. This tax is just one thing in a basket of new things coming down the pipe. Some things like this tax will come from the Province. Some other things like the Grandview-Woodlands plan will come from the City. The end goal is the same: more affordable housing.

    People always want things to change, but as soon as it impacts them personally, they just get butt-hurt and want someone else to have to sacrifice something. I’m for the tax. I’m not anti-immigration. I think the Province’s economists are freaking out that we’re headed for some crazy bubble and collapse that could devastate the economy instead of a soft landing. If new (wealthy or not) immigrants and permanent residents want to bid up a place to live, that’s just normal housing market supply and demand. But, we’re at the point where foreigners who have no intention of living here are investing/flipping now. 30% year over year is crazy. So, I’m not surprised the Province is trying to cool things down a bit and take the foot off the gas — if not to make housing more affordable, then at least to stave off the threats to the overall economy of a hard landing.

    Anyway, the big split that I’m seeing is the within the media itself. As a long time news junky, it really feels to me like something fundamentally snapped with this topic, like reporters are taking sides with their articles and inflaming things instead of just neutrally reporting. The twitter fights are getting bad, and, I think, damaging to the profession.

  • francesbula

    Not trying to divide up opinions at all. Just struck by some of the similarities. (There were also immigrants in Britain who voted for Leave, by the way, so I’m not sure that having an international population means that all of that international population votes one way.)

    And I don’t interpret Brexit the way you seem to, as a 1 per cent versus the 99 per cent thing. There’s been a lot of good reporting by various outlets on why people in some parts of Britain voted to leave — a sense that globalization was benefitting some but not all. Don’t you think there’s a sense of that here? People feeling like the developers and business class like globalization/foreign investment because it benefits them, but many others feeling the negative impacts, i.e. loss of housing affordability.

    As for the media stuff, it is a bit weird. I’ve never experienced anything quite like this in my life, where I see reporters attacked by other reporters. In some ways, I think the differentiation among media reporting is good. There are some reporters focusing on apparent money-laundering, others on the investor program, others on the demolition of pre-1940s houses, others on what the development industry is saying. Like having good lawyers arguing various sides, I think it helps the public get a very broad picture of what’s going on. But there are stories that seem to set off one group against another. I think that reflects how emotional this is for many.

  • Morven

    If here anything as bad as not having a policy, it is introducing a policy without any evidence that the decision makers weighed up the costs, risks and benefits of the various options. Or even considered any options.

    We will just have to assume that the art of policy analysis is missing in action in Victoria.

    The only cogent analysis seems to flow from UBC, SFU and David Eby. And there is no evidence that the provincial government even looked at those contributions.

    Pity.
    -30-

  • Morven

    Even the Los Angelenos take this matter seriously.
    http://www.latimes.com/business/la-fi-llc-money-laundering-20160727-snap-story.html
    -30-

  • IanS

    And a gift for lawyers. 🙂

  • IanS

    I think I would describe the tax more as a Donald Trump moment, than a Brexit moment.

    At the very least, it should have exempted contracts entered into prior to the tax coming into force or, alternatively, prior to the tax being announced.

  • Kirk

    Housing is historically a lot more expensive now. I mean that in a “unprecedented” way. In Vancouver, our prices rise faster than inflation, and we expect that — hemmed in by mountains, desirable place to live, yada yada. But, when we hit 30% year over year, it means something happened. So, I’m not surprised that the general public sentiment has changed.

    But, the vast majority aren’t looking to march down the streets. They just want more affordable housing. I don’t think it’s some sort of big anti-developer, anti-corporate, anti-globalization movement. I think they would’ve been just as happy with more rent protections or density in Shaughnessy or more Skytrain to the burbs, etc. It’s the BC Liberals that came up with the anti-foreigner tax as the first step (of probably many).

    Regarding the twitter piss fest, yeah, I think everyone needs to hit the pub together and remember to report the news, not steer the news. It’s a lawyer’s job to present a one-sided, distorted argument. And, the side with the most expensive lawyers wins — not a model I want for media control. But, I understand the point you’re trying to make.

  • A Taxpayer

    I think our Brexit moment actually occurred before the Brexit vote when the increase in sales tax to fund transit was voted down. Clearly the ramifications of the No vote was not as far reaching or as significant of the Leave vote but there were many common elements:

    – The elites from both sides of the political spectrum came out strongly for a Yes vote and were ignored;

    – The Yes side forecast dire consequences if the tax was voted down;

    – And, most importantly, the Yes side ignored, denied or severely downplayed the real concerns people had about giving Translink more money in light of their performance.

    If there is a connection between the property tax and Brexit it’s that Premier Clark gets that ignoring or downplaying the concerns of people can have serious consequences and could very well tip the election results next year.

    We are seeing this play out in the US Presidential race. Donald Trump basically wrestled control of the Party away from the Republican establishment. The Democrat establishment retained control of the party but look at the results. Clinton was only able to get 55% of the vote in the primaries against a single candidate who should have been dispatched early in the campaign. One poll shows that 68% of Americans don’t view her as honest or trustworthy. There really isn’t a good outcome in November.

  • winnifred

    Frances, I dont see this 15% tax as our version of Brexit. However, I do see the way David Eby and John Horgan’s use of foreign money and foreign buyers as our version of Donald Trump’s blame the Mexicans. I wonder when are we going to call them out. Is it really worth it, the NDP needs to ask themselves.
    As for the media, traditonal media always play pack journalism, this is not surprising. But I hope to see more coverage on how ethnic media cover or not cover this hot real estate mess. I have never seen so much confusion as I see now.
    I like the 15% tax because it applies to all non-Canadian buyers, those non-Chinese ‘foreign buyers’ included.

  • Look Deeper

    I see this neither as our version of Brexit or Trump’s Mexicans. I am more inclined to see the mass movement of capital from one geography (or national market) into residential real estate in another geography (or national market) as an unintended consequence of the expansion of global markets and the lowering of trading barriers. Clearly, it has never been easier for a foreign investor to assess and purchase residential real estate in another market than it is today — whether that is a Canadian purchasing a condo in FL or a Russian purchasing a Mayfair apartment in London.

    The movement of capital from one area to another is nothing new. A certain level of such outside capital creates a healthy liquidity in what otherwise can become very static or stagnant local real estate market. e.g. everyone in BC is familiar with the impact of Albertan money that comes into the Okanagan, the triple-down impact of the heated Vancouver real estate market to other BC communities is equally well known and relatively accepted.

    However, there seems to be evidence that the extent of such capital flows has significantly increased and equally the velocity of transactions. This would not be a social problem if this capital were moving into industrial development or pure investment vehicles like stocks and bonds. It does become a social problem when this capital disrupts the ability of local residents to own property in their own community. This is not the society that we want — not the type of society anyone wants whether you live in Vancouver, Sydney, Miami or San Francisco.

    It is not surprising that governments have not yet determined how to deal with these large movements of capital into local residential real estate. The issue is how to control the excesses without killing the market completely. That said, it was clear in Vancouver that things were/are seriously out of control and that something needed to be done. Whether this particular tax will be perfect, it will have an impact and the impact will be directionally correct. We can hope and expect that our government will monitor and learn from this approach and adapt as required.

    To allow large, unrestrained inputs of foreign capital into a residential real estate market is a recipe for social unrest in the long term and needs to be controlled in some way.