Effects of new foreign homebuyer tax remain to be seen: experts

The effects of an extra property tax on foreign homebuyers remain to be seen although the government wanted to cool Vancouver's extremely hot housing market, said experts on Thursday.

Thomas Davidoff, an economics professor, said the new tax is a net positive for affordability in Vancouver. "I think it's a good step and it's politically very popular here," he told Xinhua.

The affordability situation is so severe, and there is such strong demand from the Chinese mainland for property in the Greater Vancouver region, said the professor with the University of British Columbia.

"If you made me pull out a number, I would say relative to a world without this tax probably about a 10 percent lower price, but it is so hard to know what the impact will be," the professor said.

Nothing would change if rich foreigners keep buying homes at the same pace as before, or if they start buying property through friends or professional acquaintances whom they trust, he said.

He claimed to be part of a group that believes a property tax would be more effective if it targeted only property buyers who don't pay income tax here regardless of their nationality.

Adil Dinani from Royal LePage Realty, a local real estate agent, also said that it was too early to talk about the effectiveness of the new tax.

"When there is uncertainty in the air, which is the general sentiment now, with the tax, and how it's going to unfold and how its going to effect the broader market, and the buyer sentiment, it does shake confidence," he told Xinhua on Thursday.

The new tax caught everyone by surprise when the British Columbia government announced it on July 25, said Dinani.

"There wasn't a lot of consultation ... It almost felt like Premier Christy Clark was shooting from the hip, and not really looking downstream as to the impact of what this type of policy would have on the broader market, and especially locals, who have a lot of their purchases tied to foreign national buyers."

The new tax, which covers residential property deals only, took effect on Tuesday. The move came after the government tracked all residential real estate transactions across British Columbia and reported that foreigners spent more than 885 million Canadian dollars (679 million U.S. dollars) on Metro Vancouver real estate in a recent five-week period, about 10 percent of the value of all real estate purchased in the region over that period.

(APD)