Breaking It Down: A Quick Guide to Understanding the New 15% Foreign Ownership Tax

August 18, 2016 Policy Changes

Breaking It Down: A Quick Guide to Understanding the New 15% Foreign Ownership Tax

As of August 2, 2016, the Government of British Columbia (BC) has implemented an additional property transfer tax (PTT) of 15% on all residential property transfers to foreign buyers in the Greater Vancouver Regional District.

So, if you’re a foreign national or a foreign corporation looking to buy in the Metro Vancouver area, be prepared to pay the increased 15% tax.

The 15% foreign ownership tax has come in response to growing concerns over Metro Vancouver’s exceedingly hot housing market, a housing market speculated to be fueled by foreign investment. Over a four-week period between June and July, the BC Government recently began tracking all residential real estate transactions in the province.

Finance Minister Michael de Jong stated, “The data we started collecting earlier this summer is showing that foreign nationals invested more than $1 billion into BC property between June 10th and July 14th, more than 86% of it in the Lower Mainland.”

Minister de Jong also noted that “While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure on a market struggling to build enough new homes to keep up. This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”

Currently, British Columbians already pay property transfer taxes based on the value of their property. For example, a 1% tax rate is paid on the first $200,000 of a purchase. Subsequently, 2% is then paid on a purchase value exceeding $200,000 up to and including $2 million. And, 3% is the tax rate charged on a property value exceeding $2 million.

So, will this 15% foreign ownership tax have a spillover effect on housing prices on Vancouver Island?

It is still too early to tell.

Overall, home prices on Vancouver Island remain fairly competitive. When buying or selling your home, remember it is important to connect with a local Realtor® who understands your needs and your community’s housing market.