Chinese Envoy Challenges Vancouver Home Tax as Fallout Spreadsby
Consul General conveys qualms to British Columbia officials
New data shows C$1.5 billion of condo pre-sales at risk
China’s top envoy in British Columbia challenged the Canadian province’s new 15 percent tax on foreign home buyers, questioning the justification behind the hastily imposed measure.
"Why a 15 percent tax? Why now? Why this rate? What’s the purpose? Will it work?" Liu Fei, China’s consul general in Vancouver, said in an interview Thursday. "The issue is how to help young people afford housing," she added. "I’m not sure even a 50 percent tax would solve the problem."
Liu’s comments come amid signs of the expanding fallout from the levy, which took effect on Aug. 2 just eight days after it was announced and threatened to slow or scuttle many deals. The measure was a response to growing public pressure in Canada’s third-largest city, where the benchmark detached home now costs C$1.58 million ($1.2 million) and anecdotes abound of offshore investors bidding up prices and then leaving homes empty.
Liu said she has expressed qualms to some provincial ministers after receiving calls from distressed Chinese students locked in contracts to buy homes but unable to drum up the extra cash to pay the tax.
The tax appears set to derail thousands of deals, may prompt calls for legal action and will also hit Canadian home sellers who suddenly lose their buyers.
When the levy took effect, roughly 2,300 units valued at C$1.25 billion had been pre-sold to foreign buyers that may be at risk, according to estimates by Vancouver-based Urban Analytics Inc.
Re/Max Holdings Inc., one of the biggest residential real estate brokerages in Canada, estimates 45 home sales could collapse this month. The tax has suddenly chilled the market and "virtually no business is being done," Western Canada Regional Executive Vice President Elton Ash said in phone interview this week. Failed deals could have a “domino effect" that potentially jeopardize as many as six subsequent sales, Ash said.
Liu said blaming high property prices on foreign buyers, especially Chinese, is unjustified. While Chinese nationals represent the biggest group of foreign home buyers, they comprise less than 3 percent of total transactions in the Vancouver region, according to government data.
"This is a big country with a small population," Liu said. "It needs immigration to grow the economy."
Liu called for a more holistic approach to make housing more affordable, such as timelier data to better match supply with demand, a more extensive public transit system and taller buildings to house a growing population.
Many Vancouverites, accustomed to unimpeded views of mountains and ocean, are fiercely resistant to increased high-rise development. About 65 percent of the city of Vancouver is zoned for only single-family homes, according to the Urban Development Institute. Meanwhile, a C$7.5 billion plan to fund public transit was voted down in a referendum last year despite increasingly long commutes that undermine labor productivity.
"Without a plan, everything is a disaster," Liu said. "We can send people to the moon -- housing is just a small problem."