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'Nightmare' Vancouver home tax threatens foreign tech talent
[VANCOUVER] Vancouver's technology industry is in danger of becoming collateral damage in British Columbia's push to rein in spiraling home prices.
The surprise decision last week to impose a 15 per cent levy on overseas property investors may make it even harder for Vancouver to attract foreign talent and reach its goal of becoming a Canadian version of Silicon Valley. The city already has two major strikes against it: some of the highest housing costs and lowest wages among North America's emerging technology hubs.
"It's a complete shock, a nightmare," Eric Kong, a Singaporean computer scientist who's in the middle of relocating his family to Vancouver, said in a telephone interview.
"If I'd known this, we would've gone somewhere else."
With education that also includes a masters degree in finance, Mr Kong is exactly the kind of expatriate the city is trying to attract. However the new tax, which took effect this week, is putting his plans into a tailspin. He said he needs to come up with an extra C$114,000 (S$117,000) to finalise a deal for a C$775,000 home.
Cancelling the move means he'd forfeit the C$80,000 deposit and prepaid tuition for his two daughters. He'd also have to scramble to find a new home in Singapore, where the family gave up its lease, sold their car, and packed boxes which are about to be shipped.
Mr Kong isn't the only foreign buyer put out by the new measures. The regional land title office extended its hours through a holiday weekend to deal with the crush of deals being rushed through before the Tuesday deadline. It also began accepting faxed applications on Monday until 11 pm after the online system faced technical glitches, according to an advisory sent out to users.
Buyers who aren't Canadian citizens or permanent residents will pay an additional 15 per cent transfer tax on purchases of residential homes in Vancouver starting Aug 2, according to measures outlined by the British Columbia government on July 25.
"This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs," said finance minister Michael de Jong.
The city, which needs higher incomes to match its cost of living, is seeking to remodel itself from a 19th century mining and lumber town into a high-tech mecca for animation design, startups and financial services. It's home to Hootsuite Media Inc, one of Canada's few private tech companies to reach a US$1 billion valuation, and the city's tech scene generated C$23 billion in revenue in 2014, according to data from the Vancouver Economic Commission.
Failure to Attract
Yet it struggles to attract high-end talent and corporate head offices, or to build the transportation infrastructure to support income and productivity gains.
"It is good that the British Columbia government is taking action against the inflation of real estate prices, but it might have negative effects on US tech talent," said Boris Wertz, a venture capitalist who invests in tech startups in Vancouver.
Tech jobs in British Columbia pay on average 43 per cent less than those in California, according to a June 2015 report by the provincial statistics agency. Add in the high cost of living and the city can be a hard sell. Hootsuite took months to find a chief financial officer last year, eventually hiring one from Canadian software giant Open Text Corp.
Mr Kong, who decided to move to Vancouver before securing a job, had plenty of options. With his programming and financial-modeling skills he was confident of finding work or growing a business almost anywhere. But the family was smitten by Canada's landscape and people during a vacation a year ago.
Many Vancouverites, accustomed to unimpeded views of mountains and ocean, are fiercely resistant to increased high-rise development. A C$7.5 billion plan to fund public transit was voted down in a referendum last year. Long commutes add to the city's difficulties in attracting high-end talent, the Greater Vancouver Board of Trade said in a May report.
Low education levels and second-tier jobs also contribute to undermining labour productivity in Vancouver, which ranked a mediocre "C" compared with top-ranked Seattle, San Francisco and Portland, in the trade board's study of 20 global cities.
To some in the city's tech scene though, the new tax measures may not be strong enough.
"I know of many people who couldn't afford to move to Vancouver because of the cost of housing," said Dennis Pilarinos, who worked at Microsoft Corp and Amazon.com Inc before founding Buddybuild, whose software helps mobile app developers test their products.
"It's a step in the right direction but I'm not convinced that it's enough." Many hope that in time, the new tax will make it easier to recruit workers by making the city more affordable for all. Tech executives, including Hootsuite chief executive officer Ryan Holmes, have lamented the exodus of young talent driven out of the city by unaffordable housing. The average price for a single-family detached home in Vancouver reached C$1.58 million in July, a 38 per cent increase from a year earlier.
Sales, however, fell 19 per cent from July 2015, according to figures from the Real Estate Board of Greater Vancouver released Wednesday. That's the first annual decline in three years, indicating that demand may have peaked just before the tax was announced.
Not everyone thinks foreign speculators are the main culprit in Vancouver's housing saga.
"The idea that local residents are being crowded out doesn't add up when you look at the numbers," said Greg Carros, managing director of Engel & Völkers brokerage in Vancouver.
Overseas buyers account for about 10 per cent of sales in the Vancouver region, according to government figures released last month.
"Vancouver will always be in high demand because it's a great place to live."