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Clark government’s foreign buyer tax a matter of too much too late

I return to the city five weeks after Christy Clark’s 15 per cent tax on real estate sales to foreign buyers in Metro Vancouver went into effect to find a once buoyant market in serious decline.
clark
According to columnist Allen Garr, "It is not that Clark has done too little too late to deal with foreign buyers. She has, with her tax, done too much too late… It is clear, given the rush with which it was introduced, that Clark had no idea what impact it would have on anything except, she hoped, her political future."

I return to the city five weeks after Christy Clark’s 15 per cent tax on real estate sales to foreign buyers in Metro Vancouver went into effect to find a once buoyant market in serious decline. The populace of buyers and sellers has been consumed by a certain fear and loathing driven by the premier’s clearly knee-jerk act.

For months, if not years, Clark and Finance Minister Mike de Jong refused to do anything about the impact foreign buyers were having on housing affordability. They argued that they didn’t want to tamper with people’s retirement nest egg wrapped up in the value of their homes.

They were ideologically loath to interfere with the marketplace.

Finally feeling the heat from a restless public increasingly priced out of the market and therefore threatening Clark’s re-election possibilities, de Jong committed to gathering data — six months’ worth we’re told — to see what impact if any offshore buyers were having.

In the end, after a couple of weeks, and with David Eby on the opposition NDP benches leading the charge that would hinder a Liberal victory in the approaching election, Clark tossed concerns about retirement nest eggs and laissez-faire markets aside. Instead she hoped to hobble Eby and his party by announcing this new tax — to say nothing of raking a few bucks into the provincial treasury.

What you should know is that even before Clark imposed the tax, the heat was coming out of the market. For months, sales have been declining to what the Vancouver Real Estate Board in a release last Friday called “more historically normal activity.”

Now, with their first assessment since the tax was implemented, they report sales in August were down by 26 per cent from the previous year.

Buyers and sellers are so far standing pat — staring each other down while benchmark prices are “virtually unchanged.”   

And here is a not uncommon tale: An acquaintance of mine tells me that literally hours before Clark made her tax announcement, a person confirmed a deal to buy his East Side condo. That person was planning on selling their suburban townhouse to eliminate a lengthy commute time getting to work. The closing date for the deal was Oct. 1. The buyer put down a $35,000 deposit.

My friend, like many in his position, fully expects that deal will now fall through. That person in the burbs is apparently getting zero interest in their townhouse. At best they will be forced to accept a low-ball offer and stretch themselves even further, if that is possible, to buy the East Side condo. It is either that or give up the $35,000.

It is not that Clark has done too little too late to deal with foreign buyers. She has, with her tax, done too much too late. And according to the Real Estate Board’s report, “It’ll take some months before we can really understand the impact of the new tax.”  

It is clear, given the rush with which it was introduced, that Clark had no idea what impact it would have on anything except, she hoped, her political future.

But there is nothing in her actions that will make houses significantly more affordable. If you can’t afford a $3-million house in Kitsilano, it is unlikely that you would consider a 10 or even 20 per cent drop in price a bargain.

And let’s not forget the background to this: a real estate industry that for more than a decade under the provincial Liberals had been self-regulating, that allowed a number of unscrupulous agents and agencies to profit mightily by “shadow flipping,” that regularly failed to report
foreign purchases by concealing the buyers’ country of origin and that failed to report money transfers to the federal body monitoring money laundering.

Meanwhile the provincial oversight agency for the industry was being strangled by vacancies in their ranks by government caps on salaries. That point was made by the province’s auditor general Carol Bellringer at the same time Clark was announcing her new tax.  
Bellringer said: “It’s like having a smoke detector in your house, but not buying the batteries.”

It is a point B.C.’s Superintendent of Real Estate Carolyn Rogers said she had been making for the past three years.

But then there was no election on the horizon.

@allengarr