Vancouver Foreign Home Buyers Tax

Earlier in August, the city of Vancouver imposed a 15% property tax on all foreign buyers coming to the city. Some considered the tax long overdue in containing property prices spiraling out of control, thanks to wealthy Chinese buyers. Some others, especially real estate agents, have vehemently pushed back against the tax.

The Need for a Foreign Home Buyers Tax

Vancouver’s rise as an appealing but unassuming Canadian city to one of the world’s most expensive cities was quite dramatic. Only Hong Kong and Sydney are less affordable than Vancouver at the moment. London, surprisingly, is more affordable than Vancouver. In the past year alone, the price of a one-family home in Vancouver exploded by an astonishing 30% (or about 1.4 million CAD). This increase is only the latest in a decade-long trend of astonishing price increases.

Vancouver’s price-to-income ratio is 10.8. That means a good majority of local residents cannot afford to purchase a family home in the city. So how did it come to this?

Vancouver’s unwanted rise to fame can be solely dedicated to wealthy Chinese buyers. As the middle-class swells in China, and the country creates new wealth, the rich Chinese are moving their money overseas. Chinese are not yet confident enough in their economy’s long-term stability. Foreign property, therefore, is seen as a very good investment among affluent Chinese. Vancouver’s coastal location, amicable culture and great schools certainly attracted wealthy Chinese seeking overseas property.

The result was a stunning rise in property prices in the city. While realtors were making breathtaking profits on deals, regular home buyers suffered. Numerous local protests and concerns led to the national government authorizing the city to impose the foreign buyers tax in an effort to keep the prices from getting even more out of control.

Effect on the Real Estate Market in Vancouver

The tax had a deadline on August 2. Soon before the deadline, a “stampede” of foreign buyers were making deals to avoid the tax, The Star reported. However, after the deadline, the foreign purchases of the city’s property seem to have cooled, according to local media reports.

According to data gathered by the British Columbia Financial Ministry, real estate deals in Vancouver involving foreign nationals have steeply declined. For several weeks prior to the tax, ministry numbers show that there were 1,974 foreign home buyers in the city. After the tax, the number was reduced to a mere 60.

Implications of the Tax

Early data shows that the tax is cooling the overheated Vancouver real estate market as intended. However, it’s too soon to say for sure what the long-term effects of the tax would be. Some lawmakers fear that realtors, brokers and others involved in such deals would soon find workarounds to the tax. It’s not impossible to avoid paying the tax or launder money to get around it. The tax is not without its weaknesses. It has also been pointed out that some foreign buyers are so wealthy, a 15% tax is simply not going to deter them.

Class Action Lawsuit against the Tax

The tax was not without controversy. Almost all real estate agents were opposed to it. Soon after the tax came into effect, Jing Lim, a college student in the city, led a class-action lawsuit against the tax. Thanks to the tax, she now has to pay an extra 84,000 CAD on a 560,000 CAD townhouse she had signed to buy.

Lim’s claim is that the tax is inherently discriminatory against non-Canadians, which violates some 30 international treaties Canada has signed, especially the ones where Canada agreed to treat all people equally regardless of citizenship. The lead lawyer in the lawsuit, Luciana Brasil, also pointed out that the tax affects all legal non-Canadians in the city, who are not all wealthy Chinese.

The lawsuit is still pending in the courts until a judge authorizes it to proceed.

Tax and Debt Levels in the City

Prime Minister Justin Trudeau recently pointed out that the city of Vancouver has an “affordability crisis” because of foreign money.  He was referring to the thousands of working-class Vancouver residents who can no longer afford to live in the city they were born and raised in.

Debt levels in cities like Vancouver are high. Many Canadians are forced to take out housing loans they cannot afford to buy property in the city to start families. The mortgages eventually begin bearing down on other expenses in the household. Eventually, low to middle-income residents have no choice but to take out high-interest generating personal loans to not miss mortgage payments.

One high-interest personal loan is enough to snowball debt levels for a low-income home owner. Home owners end up resorting to HELOCs (line of credit loans) to pay off personal or credit card debts. Some acquire so much debt that they have to consolidate multiple debts to be able to pay them down.

Debt has reached crisis levels among low to mid-income homeowners in the city. If the foreign home buyers tax manages to cool down the ballooning property prices, the residents certainly will be able to benefit.

Read More:

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Vancouver Fashion Industry

Vancouver’s days as a city full of boring bankers and uninteresting nine-to-five workers are long gone. The city has become the very definition of cosmopolitan in the past decade, largely thanks to the thriving fashion industry. Vancouver’s fashion scene is growing exponentially. The city’s proud tradition of welcoming diversity is contributing to innovative and ingenious designs people from all over the world absolutely love. Also, the success of Canadian brands like Lululemon is inspiring many young designers.

Vancouver Fashion at a Glance

Vancouver was long a sought-after destination for international fashion brands who wanted to branch out to Canada. Now, rather than international brands, it’s the local brands and designers leading the city’s fashion scene.

Textile manufacturing in the city has historically been a strong industry. Thanks to textile manufacturing, Vancouver has managed to attract big clothing companies like Garden Lion Garment, Dynasty Fashion Wear Manufacturing and Max Clothing Manufacture. Textile manufacturing naturally leads to opportunities in fashion like fashion design, textile engineering and sales. Thanks to big-time clothing manufacturers coming to Vancouver, local designers have gotten a big break.

The Vancouver fashion scene is aiming not just to capture the local audience, but international audiences as well. Clothing brands are now coming up with stylish clothes that also ensure comfort. Lululemon is a big example in this regard.

The Lululemon Effect

Lululemon is one of the biggest activewear brands in the world. This unique Canadian brand has managed to redefine workout outfits for style-minded modern women. The brand is quite popular for designing yoga pants that women can wear to sessions, and then to the café for an outing with friends.

Lululemon’s success, especially in the highly competitive United States (everyone in California now does yoga in Lululemon), has motivated and inspired many an aspiring designer in Canada. Many brands now aim to recreate what Lululemon did with activewear. That is, design comfortable yet highly chic outfits suitable for multiple occasions.

Fashion Jobs

The thriving fashion scene in Vancouver has also given rise to a number of new jobs in the city. While traditional jobs in fashion—like modeling, photography, retailing—are growing thanks to the thriving fashion scene, the industry has also created a host of new jobs.

Who has heard of professional fashion buyers, fashion forecasters, and visual merchandisers? These are all fashion-related jobs in Vancouver that oil the production chain. Fashion has interestingly also helped other struggling industries. For example, print newspapers, which are in decline in Canada as well as in other places, have found a new job for journalists thanks to the fashion industry—fashion journalism.

Fashion Education

As jobs in fashion grow along with the industry, fashion education has also been thriving in the city. A number of institutes and programs have sprung up exclusively dedicated to the study of fashion. These are not just for-profit educational programs without any merit. Vancouver fashion schools like Kwantlen Polytechnic University and the JC institute are not only renowned in Canada, they are also famous in all of North America. Institutions like LaSalle College and the Art Institutes are also pioneering fashion education on this side of the planet.

Two decades ago, Vancouver might not have imagined itself as a fashion destination. However, it certainly is now. The city is a hotspot destination for locals and tourists alike to shop for clothes. The fashion design scene is also thriving in a manner akin to places like New York. Fashion shows are now common events throughout the week. The city is also attracting aspiring entrepreneurs and designers from more rural parts of Canada with high hopes of becoming the next creator of a brand like Lululemon.

 


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