July 28th 2016, The Liberal Government passed a law pertaining to Foreign Real Estate Investors in the Beautiful Province of British Columbia. A not so beautiful 15% Tax Law was implemented for all property purchases of those living outside the country. This new Law came into mandate as of August 4th 2016.
The purpose of this Law is to encourage new housing, rental supplies, opportunity for first time home buyers, as well as low-income earners to buy a property and have the ability to. The intention is for all these benefits to develop and become a positive impact on society, however what will happen to the rest of the market and how will it really unveil ?
The initial effects of this implementation has caused absolute chaos between all parties involved. Numerous home buyers are unable to afford to close their home (or choose not to), Realtors are left scrambling the city, Foreign money pulling out of their firm deals and leaving sellers high and dry on closing. All this results into a massive never-ending dominos effect of serious problems within the market and every party involved.
According to Financial Post a record breaking 9,200 deals were processed in Vancouver the last friday prior to commencement of this new law. This had lawyers and realtors scrambling with a deadline to close every single deal they could to avoid buyers walking away. Once this came into play, the mayhem truly began. This resulted in hundreds of Buyers forfeiting their deposits to avoid paying the heavy taxation, Leaving Sellers unable to close their own new home purchases, Lawyers already planning on ways to settle loss of damages, extending and cancelling seller's closing, and preparing numerous law suits that will last months and cost everyone involved thousands.
Although the picture I just painted may look dark and gloomy, the intention is for it to metamorph into a ray of sunshine in the next couple years. The city is hoping that this will stabilize the market allowing domestic buyers to have a chance again, and the City of Vancouver will be investing millions into new transit for the city which will allow growth and development in rural cities.
What does this mean for Toronto? The Buyers that have been chased out of B.C will be looking for their next location, chances are that Toronto will be their next hot spot. With the potential of millions being invested into an already hot market, the prices would only be expected to spike and decrease housing affordability. When asked if Ontario is planning to copy British Columbia, Toronto Mayor John Tory responded "I think in the end what people want to know is this: they want to know that if we're going to do anything, that it's going to be effective, not that we're going to do something for kind of show business or political purposes or even for revenue-generating purposes,". Toronto has previously attempted to keep their real estate market under control, back in February 2016 Mortgage Insurers regulations increased the minimal down payment to 10% for a property over $500,000. However, statistics have shown that this had little impact on Buying and Selling in the city.
Nobody can truly predict the outcome and future of the Real Estate market in British Columbia with this new regulation in place. It is too soon to tell how the market will absorb this change. Ontario has openly stated that they are carefully watching their cousin to the west and will be keeping an even closer eye on the trends in Ontario (Toronto) for future regulation revisions. My only suggestion would be that you yourself do the same.
Post a comment