Some developers would like to see the foreign buyer ban and taxes lifted, or be made similar to the system in Australia, where the ban only applies to existing dwellings.DARRYL DYCK/The Canadian Press
There was a time when the development industry and some policy makers insisted that foreign buying in B.C. was either non-existent or irrelevant.
Responding to growing public pressure and mounting evidence, nine years ago the Liberal government slapped a 15-per-cent foreign buyer tax on foreign property purchases. That was increased to 20 per cent when the NDP took over. And then, in January, 2023, the federal government put a temporary ban on foreign property purchases, extending the ban in January, 2024, for another three years.
In the interim, the presale condo market has dropped significantly. Many developers are now calling for governments to ease up on the restrictions on foreign buying. Some would like to see the ban and foreign buyer taxes lifted or be made similar to the system in Australia, were the ban only applies to existing dwellings.
In an open letter to Prime Minister Mark Carney, federal Minister of Housing Gregor Robertson, Premier David Eby, B.C. Minister of Housing Christine Boyle and former B.C. Minister of Housing Ravi Kahlon (now Minister of Jobs and Economic Growth), dated July 29, developers and industry advocates asked that governments reconsider the ban and the tax, or make newly built homes exempt.
They cite the fact that foreign buyers, or non-residents of Canada, have represented a significant share of investor buyers in major cities like Vancouver. Non-residents own one-in-10 newly built condos, according to the letter.
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Andy Yan, Simon Fraser University’s associate professor of professional practice in urban studies, said the number is in fact much higher in Vancouver. He said that, according to the Canadian Housing Statistics Program, one-in-10 purchasers of newly built condos between 2016 and 2022 were non-residents of B.C. But in the city of Vancouver, the number jumped to nearly 15 per cent, or 2,275 newly built condos.
In Toronto, nearly 11 per cent, or 6,790 newly built condos, were purchased by non-residents in the same period.
Non-residents purchased resale properties as well. In Vancouver, 8.6 per cent of all properties, or 17,340 units, have owners who do not reside in Canada, which could be people with or without Canadian passports. In Toronto, it’s 5.3 per cent, or 43,500 dwellings, according to Prof. Yan.
Industry stakeholders would like to see policy changes to help stimulate the market and the economy as a whole. The letter to the Prime Minister was signed by development companies Amacon, Beedie Living, Bonnis Properties, Cressey Group, Edgar, Intracorp, Mosaic, Polygon, Strand, Wesbild, Westbank and others.
Neil Chrystal, president of Polygon, said in an interview that he understands the sensitivity around the topic.
“If you don’t have demand, builders won’t build the supply that we’re going to need. Maybe we don’t need it today, but we will need it in three or four or five years. And when we’re building these towers, we need to start now to deliver in three or four or five years. So, we’re kind of stuck in a difficult spot.”
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Polygon is a long-time local developer and has not marketed to foreign buyers. Mr. Chrystal said the company’s support of an exemption on the ban reflects its concern about the broader economy.
“We don’t advertise overseas. We don’t do any of that. To be honest, I don’t think anyone’s doing that any more.” He said the foreign buyer tax and vacant home tax are disincentives. “People probably don’t want to invest here. There are other places that they can invest that might be more attractive for them, like Australia.”
“I’m not saying this because I’m a developer. I am genuinely concerned about the broader economy.”
Housing, he said, makes up a big portion of the GDP.
Ron Usher, former general counsel for the Society of Notaries Public of B.C., and presenter at the Cullen inquiry into money laundering, said that before opening the Canadian market up to foreign property investment again, governments need to ensure that existing laws are being enforced. For example, the province’s Land Owner Transparency Act was created to prevent hidden ownership behind a corporation or a trust, and potential money laundering and tax evasion. Beneficial owners are supposed to file a declaration. But Mr. Usher said he doesn’t know of any public record of a single enforcement of the law.
“They will not release the information, and there are apparently tens of thousands of non-compliant properties,” he said.
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He suggests that all transactions registered with the land title office should include proof that the transaction has also been reported to Canada Revenue Agency. Also, anyone who purchases property in B.C. should have an Individual Tax Number that identifies foreign buyers who are not eligible for a social insurance number. That way, every transaction, every property flip, will be brought to the CRA’s attention.
“We’ve never had a good system for collecting those taxes, for knowing what people are doing, and so the result is, I’m sure, that we’ve lost billions of dollars in tax revenues.”
Developer and real estate consultant Michael Geller, who supports foreign investment, said the amount of foreign buying would naturally decrease if presale requirements from lenders were reduced. Developers can’t obtain construction financing without selling around 70 per cent of the building in advance, which has made them reliant on finding investors who are willing to wait three or four years for a completed building. The financing system also results in tiny units that are investor-friendly but not suitable to many end-users.
“Why are we designing a housing production system that requires all these presales, which in turn requires all these investors, whether foreign or local?” asked Mr. Geller. “And the problem as I see it, is [the system is] resulting in all of these suites that in many instances people don’t really want.”
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Ross McCredie, founder of Sotheby’s International Realty Canada, and chief executive officer of Sutton Group, said easing up regulations around foreign buying won’t bring jobs back or kick-start construction.
“It’s too late,” said Mr. McCredie.
“I feel bad, because many of these developers were addicted to this model, and lived in this model, overpaid for a lot of pieces of land, thought they could do the presales, the government comes in and does everything [to make it] difficult for the investor. Whether foreign or Canadian, the local investor, it’s become more problematic to become a landlord or an investor in a residential housing development.”
He said all three levels of government should come up with an overall plan for employment growth and focus on housing options outside the pricey urban core, he said.
“We don’t think big any more.”
Editor’s note: An earlier version of this article incorrectly referred to Ron Usher as an “expert witness” at the Cullen inquiry. This version has been corrected.