Chinese envoy challenges new Vancouver home tax as fallout spreads
Vancouver
CHINA'S top envoy in British Columbia challenged the Canadian province's new 15 per cent tax on foreign homebuyers, questioning the justification behind the hastily imposed measure.
"Why a 15 per cent 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 last Thursday. "The issue is how to help young people afford housing," she added. "I'm not sure even a 50 per cent tax would solve the problem."
Ms 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 (S$1.64 million) and anecdotes abound of offshore investors bidding up prices and then leaving homes empty.
Ms 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 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 a phone interview last week. Failed deals could have a "domino effect" and potentially jeopardise as many as six subsequent sales, he said.
Ms Liu said blaming high property prices on foreign buyers, especially Chinese, is unjustified. While Chinese nationals represent the biggest group of foreign homebuyers, they comprise less than 3 per cent of total transactions in the Vancouver region, according to government data.
"This is a big country with a small population," Ms Liu said. "It needs immigration to grow the economy."
She 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 per cent 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 labour productivity.
"Without a plan, everything is a disaster," Ms Liu said. "We can send people to the moon - housing is just a small problem." BLOOMBERG
