Townhouses under construction in Metro Vancouver.

Government shrugs off foreign real estate fallout

Construction industry disruption expected as new tax threatens deals, says Finance Minister Mike de Jong

Premier Christy Clark and her ministers aren’t concerned about a backlash or downturn in B.C.’s hot urban real estate market from their sudden decision to impose a 15 per cent tax on foreign buyers in Metro Vancouver.

Housing Minister Rich Coleman said Wednesday the development industry was “taken aback and a bit grumpy” after Premier Christy Clark announced Monday that the new tax takes effect Aug. 2.

Clark confirmed Wednesday that there would be no exemptions to the new tax for real estate sales that were signed but not registered before the deadline. That includes pre-sold condos that were purchased before construction, if they are going to buyers who are not citizens or permanent residents of Canada.

Finance Minister Mike de Jong said tax changes are generally done on short notice, and the government expected there would be some cancelled sales as a result. But the purpose of the tax was to discourage foreign sales and replace them with sales to B.C. residents, he said.

“Part of it relates to the fact that properties going on the market are being scooped up so quickly.” de Jong said. “This disruption, this change is taking place in a market where there is incredibly strong domestic demand.”

The government intends to put the revenue from the foreign buyer tax into a housing affordability fund, but Coleman said there will be no return to government directly building social housing projects.

New initiatives will be announced in September, with incentives for builders to create more rental housing. The province already provides rent subsidies to 20,000 families to keep them in market housing, and that approach has better results than concentrating low-income people in government housing, Coleman said.