VICTORIA – About three per cent of residential real estate transactions last month in Metro Vancouver involved foreign buyers, a decline of more than 10 percentage points since the B.C. government intervened with a new tax.
The provincial government brought in the 15-per-cent tax in August as a tool to cool the overheated residential housing market in Metro Vancouver.
B.C. Finance Minister Mike de Jong said Tuesday that the government is downgrading its financial expectations from the tax.
The government had forecast the tax would bring in $165 million for the fiscal year, but the that’s been revised to $50 million, he said.
“I’m not particularly surprised by the trajectory of what’s happened,” de Jong said. “In the immediate aftermath we see investment drop off pretty dramatically. It’s starting to come back … so there are still transactions taking place involving foreign purchasers and they’re paying the additional tax.”
Provincial government figures show the rate of those purchases was up in October from September, when foreign investment stood at 1.8 per cent in the Vancouver area.
“There is a period of distortion in the market any time a tax is introduced and changed. Many transactions that would have occurred in the months following the introduction of the tax were moved to July to avoid the tax,” the government said in a news release.
“As time goes on and the market readjusts, trends say the rate and volume of foreign demand will normalize to levels we can expect to continue.”
The statistics show 140 properties worth $115 million involving foreign buyers were transferred in Metro Vancouver in October.
There are still pockets in Metro Vancouver where foreign purchases are higher, including Richmond where 6.7 per cent of all residential transactions were sold to foreigners.
The tax doesn’t apply in the Victoria area and it saw more foreign buyers in October at 6.3 per cent of all purchases.
All property transfer transactions are now subject to an audit for up to six years from the date of transfer.
The Finance Ministry has already opened 215 audit files to investigate if the correct amount of tax has been paid and it issued 30 assessments totalling $3 million.
The announcement comes weeks after B.C. Real Estate Association figures show a cooling market.
There was a 16.7-per-cent drop in home sales provincewide in October, compared with the same period last year.
The average price of a home in the province was about $607,000, down 9.1 per cent.