British Columbia Requires Seller Consent for Property Flippingby and
Finance Minister de Jong says measures will protect sellers
Canada province sees home prices soar on foreign demand
British Columbia is cracking down on a murky loophole that has fomented a surge in property prices in Vancouver, where the cost of residential homes rose faster than than in any other North American city last year.
The measures, announced Tuesday by Finance Minister Michael de Jong, take aim at a practice dubbed locally as "shadow flipping," where a property trades hands multiple times before a deal is closed, inflating its price in the process.
New regulations will force realtors drafting offers to seek sellers’ consent for flipping properties, de Jong said. Sellers will also be entitled to profit from so-called "contract assignments." If buyers choose not to seek such consent, the seller would be notified they need to seek professional advice before proceeding.
“The idea of course is to better protect sellers in the real estate market,” de Jong told reporters on a conference call from Victoria, British Columbia.
Home sales hit a record last month in the Pacific Coast city, where the price of a typical single-family home rose 30 percent to C$1.4 million ($1.1 million) in April from a year earlier, according to the city’s real estate board.
Demands for measures to dampen speculation by foreign investors have risen since the Globe and Mail newspaper revealed how brokers earn multiple commissions by reassigning a property contract to a string of buyers before the deal closes. The intermediary buyers profit when the contract is flipped and don’t pay land-transfer taxes which are only levied at closing.
The original seller earns less than the final sale price, while the end buyer pays an inflated price.
Ending shadow flipping "is a good first step to reduce the unhealthy speculation that is taking place in our housing market," Vancouver Mayor Gregor Robertson said in March. "We need to make sure that our housing is first and foremost for homes, not to be treated as a commodity."
De Jong also said new residency disclosure rules announced in February will take effect June 10. The new rules will require home buyers to disclose their citizenship to help the government monitor foreign ownership.