The province’s new 15 per cent property-transfer tax on the purchase of Metro Vancouver homes by foreigners could send some of those buyers looking to Abbotsford but is unlikely to significantly increase demand for local homes, according to one economist.
The tax applies to non-Canadian citizens without permanent residency status.
Jock Finlayson, executive vice-president of the Business Council of B.C., said the new tax will likely dampen demand for residential property in Vancouver, Richmond, the North Shore and other municipalities where prices have skyrocketed in recent years.
But while some buyers will turn to the Fraser Valley, the Victoria area and other regions outside the Lower Mainland, such movement will be minimal, he predicts.
“We’re talking about more of a dribble than a flood, simply because foreign investors who have been coming in to the real estate market tend to have very strong locational preferences,” said Finlayson.
He said foreign buyers from China are more attracted to the west side of Vancouver and Richmond because of existing strong Asian population groups there as well as the neighbourhoods’ luxury market.
Finance Minister Mike de Jong said the tax applies only to Metro Vancouver because that is where 86 per cent of the province’s foreign ownership is.
He also said there are regions of the province where the desire is to attract foreign ownership. It is possible the tax could be applied to other regions if data shows foreign ownership is becoming a problem there as well, said de Jong.
Money from the new tax will go towards a Housing Priority Initiatives Fund to help renters in high-pressure rental markets. De Jong said the fund will apply across the province, including in Abbotsford.
“I would suggest plenty of evidence Abbotsford is receiving its fair share and it will continue to receive its fair share,” he said.
Abbotsford Mayor Henry Braun said he believes levels of foreign ownership are much lower in his municipality than Metro Vancouver.
“It’s certainly not on our radar here so my guess is it’s very small, whatever it is,” he said.
Braun also said he hopes Abbotsford sees money from the Housing Initiatives Priority Fund to assist its tough rental market, which last year had a vacancy rate of just 0.6 per cent.
According to the ministry of finance, 9.7 per cent of homes sold between June 10 and July 14 in Metro Vancouver went to foreign nationals. Data is not currently available for Abbotsford.
Economists such as Finlayson and Central 1 Credit Union’s Helmut Pastrick both say more can be done to increase the supply of housing units in the market, through speedier municipal approvals for development projects.
But both also acknowledged that more rapid redevelopment and densification of single-family neighbourhoods would result in even fewer detached houses available, likely widening the price gap between multifamily units and detached houses.
Finlayson also suggested parts of the Agricultural Land Reserve that have never been productively farmed could be opened up to development.
-With files from Jeff Nagel, Black Press