From The Guardian:
Has Vancouver found the solution to a super-heated housing market?
There is a city which is suffering a worse property bubble than Sydney, whose residents are more priced-out than Londoners, and where there is a greater divide between the housing haves and have-nots than even San Francisco.
That city is Vancouver, and in response to these mounting challenges, the west-coast Canadian metropolis recently imposed an extraordinary new tax on foreign buyers – whose impact is now being watched closely by other cities grappling with bloated property markets.
On 2 August, Vancouver introduced a tax on anyone from outside Canada wanting to buy a home in its super-heated market. In future, city authorities said, if you weren’t Canadian, you would have to pay an extra 15% on the purchase price.
The impact has, by some measures, been more startling than campaigners could have hoped for. The price of the average detached home reportedly slumped by an astonishing 16.7% in August alone to C$1.47m (£856,000), according to the Real Estate Board of Greater Vancouver. Some agents are reporting that the market has gone from red hot to stone cold in a matter of weeks….
Vancouver’s experiment is being closely watched in London. According to London Assembly member Sian Berry, who stood as the Green party’s candidate for mayor: “Vancouver shows that the very rich buying up luxury flats at the expense of ordinary people is not just a London problem – it’s a growing problem all over the world.
Foreign buyers
Restrictions and incentives around the world
City/Country
Type
Details
Switzerland
Restriction
The Lex Koller restricts where and what size property non-residents can buy: non-residents are confined to buying in key holiday zones, predominately in ski resorts and areas surrounding both Montreux and Lugano; the maximum size is 200 sq m of living space, not including balconies or basement areas. The Lex Weber sets a 20% cap on number of second homes per Swiss commune: the law applies to residents and non-residents alike and if the area of the property falls under the jurisdiction of a commune that has already exceeded this limit it is impossible to sell unless the property is already owned as a secondary residence
China
Restriction
Qualifying foreign individuals and companies are allowed to buy as many properties as they wish on the Chinese mainland, but they are subject to local housing purchase limits. In Shanghai, for example, people without a Shanghai household registration are only allowed to buy one property
New Zealand
Restriction
A tax on second home properties bought and sold within two years has been introduced. Foreign buyers also have to apply for a government ID number for tax purposes. Some NZ Banks are refusing to provide mortgages for non-residents
Fuji
Restriction
Land sales in towns restricted to domestic buyers only. Foreigners who currently own houses in Fiji cannot sell it to other non-residents. Foreigners who already own land but have not built a house must do so within two years or face a fine of 10% of the property’s value every six months
US
Restriction
The identities of buyers for all-cash purchases are now required in Manhattan, Miami-Dade County, California and Texas
Canada
Restriction
In Vancouver, foreign buyers must pay a new 3% property transfer tax rate applied to the portion of a home sale that exceeds C$2m. Additionally, there is a new 15% property tax for foreign buyers purchasing within the Metro Vancouver area
Indonesia
Restriction
Foreign nationals who are resident can buy a landed house or apartment in Indonesia, though various requirements must be met, including a minimum price
India
Restriction
A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India
Vietnam
Restriction
Foreigners are not allowed to own land
Hong Kong
Restriction
Foreigners can buy property but must pay a 15% additional buyer’s stamp duty
Singapore
Restriction
Foreigners must pay a 15% additional buyer’s stamp duty
Australia
Restriction
Foreigners can buy new dwellings but cannot buy established dwellings as investment properties or as homes. Victoria, Queensland and New South Wales charge foreign buyers extra stamp duty. Some states also charge extra land tax
Spain
Incentive
The Spanish government is preparing a new law which will allow non-EU residents who purchase homes priced above €500,000 to qualify for Spanish residency
Portugal
Incentive
Portugal allows non-EU investors to gain residency. To qualify new arrivals need to either transfer €1m+ in capital to Portugal, set up a business that creates a minimum of 30 jobs or purchase a property of €500,000+
Greece
Incentive
Foreign nationals from non-EU countries who have bought property worth more than €250,000 are able to obtain five-year renewable residence permits for themselves and their families
Turkey
Incentive
Turkey allows 183 nationalities to purchase real estate without restrictions. Other incentives include automatic one year residency permits for foreign property owners and the right of Turkish citizenship after five years
Cyprus
Incentive
Non-EU nationals who purchase a property above €300,000 have the right to residency
The 15% upfront costs are a good start to curb foreign demand, BUT IT IS INSUFFICIENT !
I meet the very smart and affable UBC real estate economics professor Thomas Davidoff last night at a real estate development class put on by SFU. Tom he pointed out the two biggest issues that cause the current unaffordability: undertaxation of real estate, especially SFH (single family home) and too much SFH vs denser zoning (i.e. a lack of supply on too much land consumed by SFHs.)
re 1) In the US property taxes are far FAR higher and you can deduct interest and property taxes from your taxable income, essentially cutting in half holding costs. This benefits local income tax payers vs foreign non-working (or non US income tax paying) owners, whereas in Canada we treat locals and foreign owners the same. It is gold for foreigners to own homes here. Real estate ownership is cheap cheap cheap in Canada !
re 2) In addition we do not allow upzoning, even to townhouses in 90%+ of our neighborhoods, so instead of allowing 500,000-$1M townhouses or row houses we allow only $2-3M+ SFHs.
==> As such, much of this current unaffordability is self-inflicted and can be fairly easily changed: tax properties more and give income tax filers or seniors a credit to keep it neutral to today’s rates, and allow city wide upzoning.
Good insight here on these two topics by UBC professor Thomas Davidoff ! More on this http://www.kelownacapnews.com/news/395022891.html
There is nothing surprising about a 16% drop in prices after this tax, even though the evidence cannot be called conclusive within such a short period of data collection. You have to ask, though, What took them so long? At least the distasteful rhetoric about ‘dem dirty filthy stinkin’ rich foreigners has dissipated. With the fog clearing it’s now obvious that land supply really does influence prices after all and has underpinned high prices longer than you can say “non-taxable overseas income.”
Now, if you added thousands of the ‘missing middle’ forms of housing to RS zones after a major overhaul of planning policy to allow single family attached housing on small lots and more multi-family low rise, then you’re talking about a far bigger reduction that could put a huge dent in the 400+% increase in prices since the turn of the millennium. That would be something to write home about.
With voices like Davidoff and land planners who get it, perhaps it’s time to call on Metro city halls to reform zoning policy across the board, and for the province to come to the table to negotiate the betterment of urbanism for the majority of citizens who happen to live in cities.
You’re talking about of both sides of your mouth. Sales drop like a stone after the foreign owner tax is implemented and you’re saying this shows how land supply is the issue!?
In truth, we have little issue with supply. We have so much supply, but it’s been marketed at the top end and foreign cash. Conversations with numerous realtors confirm this. It’s obvious to so many. If you take out the foreign cash angle, it frees up so much and we don’t have to be tearing down so many perfectly good houses in this, the so called “greenest city”.
Vision’s and BC Libs handling of this crisis has been no less than atrocious. We need change at both levels as soon as possible so that meaningful policy can be applied. It’s way later than it should be, but it still has to be done.
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… unfortunately there is the whole Betteridge’s law of headlines thing.
The 15% upfront costs are a good start to curb foreign demand, BUT IT IS INSUFFICIENT !
I meet the very smart and affable UBC real estate economics professor Thomas Davidoff last night at a real estate development class put on by SFU. Tom he pointed out the two biggest issues that cause the current unaffordability: undertaxation of real estate, especially SFH (single family home) and too much SFH vs denser zoning (i.e. a lack of supply on too much land consumed by SFHs.)
re 1) In the US property taxes are far FAR higher and you can deduct interest and property taxes from your taxable income, essentially cutting in half holding costs. This benefits local income tax payers vs foreign non-working (or non US income tax paying) owners, whereas in Canada we treat locals and foreign owners the same. It is gold for foreigners to own homes here. Real estate ownership is cheap cheap cheap in Canada !
re 2) In addition we do not allow upzoning, even to townhouses in 90%+ of our neighborhoods, so instead of allowing 500,000-$1M townhouses or row houses we allow only $2-3M+ SFHs.
==> As such, much of this current unaffordability is self-inflicted and can be fairly easily changed: tax properties more and give income tax filers or seniors a credit to keep it neutral to today’s rates, and allow city wide upzoning.
Good insight here on these two topics by UBC professor Thomas Davidoff ! More on this http://www.kelownacapnews.com/news/395022891.html
There is nothing surprising about a 16% drop in prices after this tax, even though the evidence cannot be called conclusive within such a short period of data collection. You have to ask, though, What took them so long? At least the distasteful rhetoric about ‘dem dirty filthy stinkin’ rich foreigners has dissipated. With the fog clearing it’s now obvious that land supply really does influence prices after all and has underpinned high prices longer than you can say “non-taxable overseas income.”
Now, if you added thousands of the ‘missing middle’ forms of housing to RS zones after a major overhaul of planning policy to allow single family attached housing on small lots and more multi-family low rise, then you’re talking about a far bigger reduction that could put a huge dent in the 400+% increase in prices since the turn of the millennium. That would be something to write home about.
With voices like Davidoff and land planners who get it, perhaps it’s time to call on Metro city halls to reform zoning policy across the board, and for the province to come to the table to negotiate the betterment of urbanism for the majority of citizens who happen to live in cities.
You’re talking about of both sides of your mouth. Sales drop like a stone after the foreign owner tax is implemented and you’re saying this shows how land supply is the issue!?
In truth, we have little issue with supply. We have so much supply, but it’s been marketed at the top end and foreign cash. Conversations with numerous realtors confirm this. It’s obvious to so many. If you take out the foreign cash angle, it frees up so much and we don’t have to be tearing down so many perfectly good houses in this, the so called “greenest city”.
Vision’s and BC Libs handling of this crisis has been no less than atrocious. We need change at both levels as soon as possible so that meaningful policy can be applied. It’s way later than it should be, but it still has to be done.