Real Estate

Vancouver housing bubble?

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  • Sep 21st, 2019 10:53 am
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Feb 29, 2008
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I'm curious to know how many people avoid capital gains tax. I'd think they were non-Canadians. Trust me, I really hate having to fork out all that money but I also don't want to fork out a lot more in fines. That is enough to keep me in check. I'd have a tough time sleeping if I didn't include capital gains on my taxes.
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Dec 14, 2007
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JayLove06 wrote:
Jul 8th, 2019 6:32 pm
I'm curious to know how many people avoid capital gains tax. I'd think they were non-Canadians. Trust me, I really hate having to fork out all that money but I also don't want to fork out a lot more in fines. That is enough to keep me in check. I'd have a tough time sleeping if I didn't include capital gains on my taxes.
I think the requirement to declare prevent honest theft more than anything else. For example... turnstiles in subway systems, don't stop people who are determined not to pay... they just increase the perception of safety and make it so that honest people aren't as tempted to cheat the system, because the penalty and embarrassment of being caught is high.

If you must explicitly declare the proceeds of a house to get the exemption, then that paper trail and deliberate action is enough to prevent many from just omitting to declare the sale as income. I've always thought that the government should institute a renter's non-refundable tax rebate.

Imagine if the government said they're going to give a 2% rebate to renters up some maximum of say $500 / year. It'd be the opposite of the home-owners tax grant. If that was in place, renters all over would declare the amount of rent they paid. It would be a relatively easy thing to cross-reference rental income at an address with declared income at an address... and GOOD renters would be asking for receipts. Most landlords want good, honest, tenants who pay the rent reliably, and on time. Those renters probably want an honest landlord they're not worried about being shady... or IOW, a landlord who declares income on their taxes as the law dictates. Sure, some landlords will ask to be paid in cash in exchange for a cheaper rent... but those landlords usually suffer when it comes to tenant quality, I would think.

I suspect that there are LOT of suites out there generating income that land owners are not declaring. We don't rent out our suite, so we wouldn't be affected... but back when we rented, I would always wonder how much rent the land lord was actually declaring based on some of the personalities and reluctance to provide receipts ( at times ).
I'd love to write history... in advance.
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Dec 27, 2006
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https://www.theglobeandmail.com/busines ... n-foreign/

Vancouver real estate market experiences dramatic drop in foreign buying following tax
Published 4 hours ago
Foreign buying has dropped dramatically in the Vancouver region’s real estate market three years after British Columbia introduced a tax that targets international purchases, a policy move that has helped drive down prices.

International buying of real estate decreased to 2.5 per cent of total residential sales in the Vancouver area in the March-to-May period of 2019, down from 13.2 per cent in the early summer of 2016, according to statistics compiled by the B.C. Finance Ministry. In real numbers, only 261 sales involved foreign purchasers over March, April and May this year, compared with 1,974 over the 2016 period.

In August, 2016, the previous BC Liberal government introduced a 15-per-cent tax on foreign buyers in the Vancouver area. The BC NDP government raised the foreign-buyers tax to 20 per cent in February, 2018, and also expanded the tax to other urban markets in the province.

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The proportion of foreign buying in the region has gone from roughly one in every eight transactions before the tax, to one in every 60 this May.

“The market previously was not being kept afloat by local fundamentals but was rather being inflated due to outside sources of money from abroad,” Josh Gordon, an assistant professor at Simon Fraser University’s School of Public Policy, said in an interview.

There has been a trend of international buyers avoiding B.C. over the past three years, but the retreat has been uneven. For example, purchases by people who are not Canadian citizens or permanent residents accounted for less than 2 per cent of total residential sales in September, 2016, but rose to 4.2 per cent in December, 2017, and ascended to 5 per cent in February, 2018, before resuming a downward pattern.

Andy Yan, director of Simon Fraser University’s city program, said the latest statistics show the dramatic impact that public policy can have on the free market.

“It isn’t just about letting the mechanisms of the housing market play out,” Mr. Yan said in an interview on Monday. “The foreign-buyers tax is an example of demand-side policy that was needed. You can see this as an abatement of foreign buyers.”

Prices have fallen across the Vancouver region since mid-2018, but they have tended to drop the sharpest in municipalities where there were elevated levels of foreign buying in the spring of 2016, said Prof. Gordon.

Industry observers say other provincial factors influencing the housing market include a crackdown on money laundering, taxes aimed at higher-end properties, as well as what the NDP government calls a “speculation and vacancy tax,” which targets primarily out-of-province residents who don’t rent out their homes.

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The foreign-buyers tax came in effect in response to concerns about the role of international influences during the housing boom from mid-2013 to mid-2016.

Between January, 2018, and May, 2019, the percentage of foreign buying out of total sales in Metro Vancouver had a monthly low of 1.57 per cent in July, 2018, and the second-lowest at 1.62 per cent in May, 2019. Of the 3,521 total residential transactions that closed in the Vancouver region in May this year, only 57 involved foreign purchasers,.

Prof. Gordon said that Burnaby, Richmond, the City of Vancouver and the District of West Vancouver are among the municipalities where the ratio of housing prices to local incomes remains high, despite a decline in prices of nearly 10 per cent regionally over the past year.

Within Vancouver proper, foreign purchasers accounted for 22 of the 800 transactions in May, or 2.75 per cent of the city’s total, according to data compiled by the B.C. Finance Ministry.

10,416 total residential transactions closed in the Vancouver region in March-to-May period this year, compared to a total of 14,978 in the months leading up to the new tax in 2016.

“We’re tackling the housing crisis and money laundering head-on to build a more sustainable economy that works for everyone,” B.C. Finance Minister Carole James wrote on Twitter last week. “I’ll continue to watch the housing trends closely but am cautiously optimistic that the housing market is returning to balance.”

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The slowdown in housing sales in general has meant a reduction in taxes for government coffers. In May, revenue from the foreign-buyers tax tumbled to $6.5-million, down by half when compared with the $13-million collected in April.

Bryan Yu, deputy chief economist at Central 1 Credit Union, said total residential purchases by domestic and foreign buyers could pick up later this year, but he expects prices to continue slipping before stabilizing in 2020.

On Jan. 1, 2018, Canada’s banking regulator implemented a stress test, making it more difficult for buyers to qualify for mortgages.

“The sales downturn is largely policy driven, reflecting the federal mortgage stress tests and various provincial measures,” Mr. Yu said in a research note. “Current unrest in Hong Kong marks a upside risk for the market, and could trigger a return of Hong Kong-Canadians, but this is not a certainty.”

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Deal Guru
Jan 27, 2006
11197 posts
4581 upvotes
Vancouver, BC
Motoss wrote:
Jul 8th, 2019 11:07 pm
https://www.theglobeandmail.com/busines ... n-foreign/

Vancouver real estate market experiences dramatic drop in foreign buying following tax
Before people start claiming victory or I told you so, we have to remember that many of these types of transactions may have been done through holding companies or Canadian citizens that may not have been counted in the stats or had the FBT apply to it. We have seen a few examples in the past few years where these arrangements fell apart and the parties involved spilled the beans in court documents... While the high FBT probably drove many buyers to other parts of Canada and the world, I wouldn't be surprised if the FBT also drove a lot of buyers underground in an effort to avoid the FBT.
Deal Addict
Dec 4, 2016
1288 posts
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atomiton wrote:
Jul 8th, 2019 8:34 pm

If you must explicitly declare the proceeds of a house to get the exemption, then that paper trail and deliberate action is enough to prevent many from just omitting to declare the sale as income. I've always thought that the government should institute a renter's non-refundable tax rebate.

Imagine if the government said they're going to give a 2% rebate to renters up some maximum of say $500 / year. It'd be the opposite of the home-owners tax grant. If that was in place, renters all over would declare the amount of rent they paid. It would be a relatively easy thing to cross-reference rental income at an address with declared income at an address... and GOOD renters would be asking for receipts. Most landlords want good, honest, tenants who pay the rent reliably, and on time. Those renters probably want an honest landlord they're not worried about being shady... or IOW, a landlord who declares income on their taxes as the law dictates. Sure, some landlords will ask to be paid in cash in exchange for a cheaper rent... but those landlords usually suffer when it comes to tenant quality, I would think.

I suspect that there are LOT of suites out there generating income that land owners are not declaring. We don't rent out our suite, so we wouldn't be affected... but back when we rented, I would always wonder how much rent the land lord was actually declaring based on some of the personalities and reluctance to provide receipts ( at times ).
I think BCNDP promised $400 renter rebate during campaign, but that did not happen during first budget. Horgan promised it would happen by end of his term:
https://globalnews.ca/news/4026705/bc-n ... ate-grant/

Personally, I think it would just drive rent up further.
Deal Addict
Oct 7, 2007
4963 posts
1694 upvotes
JayLove06 wrote:
Jul 8th, 2019 6:32 pm
I'm curious to know how many people avoid capital gains tax. I'd think they were non-Canadians. Trust me, I really hate having to fork out all that money but I also don't want to fork out a lot more in fines. That is enough to keep me in check. I'd have a tough time sleeping if I didn't include capital gains on my taxes.
If the CRA thinks a taxpayer is EVADING taxes (vs. tax avoidance), the taxpayer could be jailed. We have seen examples in the past. Not sure how often this happens today but I am surprised how many people are willing to take these kind of chances.
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Oct 7, 2007
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craftsman wrote:
Jul 9th, 2019 1:45 am
Before people start claiming victory or I told you so, we have to remember that many of these types of transactions may have been done through holding companies or Canadian citizens that may not have been counted in the stats or had the FBT apply to it. We have seen a few examples in the past few years where these arrangements fell apart and the parties involved spilled the beans in court documents... While the high FBT probably drove many buyers to other parts of Canada and the world, I wouldn't be surprised if the FBT also drove a lot of buyers underground in an effort to avoid the FBT.
I agree that taxphobic people will always find a way to avoid paying taxes BUT will the transparency rules requiring more disclosure of who is actually buying not also put downward pressure on sales? I am assuming that a lot of tax evaders like the anonymity but if we remove the anonymity of the transaction, they may be less inclined to purchase in such a jurisdiction.
Deal Addict
Dec 4, 2016
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JayLove06 wrote:
Jul 8th, 2019 6:32 pm
I'm curious to know how many people avoid capital gains tax. I'd think they were non-Canadians. Trust me, I really hate having to fork out all that money but I also don't want to fork out a lot more in fines. That is enough to keep me in check. I'd have a tough time sleeping if I didn't include capital gains on my taxes.
Capital gains tax is probably harder to avoid than income tax from rentals. If rent from an investment property was never declared and mortgage interest was never used for deduction, then perhaps the landlord is finding some way to have multiple "principal residences" i.e. one property per family member. Even then it's risky, as CRA might ask why members of the same household doesn't share the same address.
Deal Guru
Jan 27, 2006
11197 posts
4581 upvotes
Vancouver, BC
BlueSolstice wrote:
Jul 9th, 2019 10:17 am
I think BCNDP promised $400 renter rebate during campaign, but that did not happen during first budget. Horgan promised it would happen by end of his term:
https://globalnews.ca/news/4026705/bc-n ... ate-grant/

Personally, I think it would just drive rent up further.
It might... But the NDP decided to shaft landlords last year by putting a cap on rent increases while not putting a cap on government taxes and fees charged to landlords so there should be some level of delay before rents go up further.
Deal Guru
Jan 27, 2006
11197 posts
4581 upvotes
Vancouver, BC
choclover wrote:
Jul 9th, 2019 11:17 am
I agree that taxphobic people will always find a way to avoid paying taxes BUT will the transparency rules requiring more disclosure of who is actually buying not also put downward pressure on sales? I am assuming that a lot of tax evaders like the anonymity but if we remove the anonymity of the transaction, they may be less inclined to purchase in such a jurisdiction.
It may but you have to remember that most of these people have used these measures for some reason or another so I suspect that they will start doing the 'next' level of covering things up - ie hire more locals to have title to the property or the company. Just like how the empty homes tax is supposed to tax empty homes, many of those empty homes are 'occupied' now by services that these homeowners hire to make them seem occupied...
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Dec 4, 2016
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craftsman wrote:
Jul 9th, 2019 1:19 pm
It might... But the NDP decided to shaft landlords last year by putting a cap on rent increases while not putting a cap on government taxes and fees charged to landlords so there should be some level of delay before rents go up further.
Lol this forum is filled with evidence that rent control doesn't work. Good luck finding a place to rent when landlords can't raise rent to market rates.
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Dec 14, 2007
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BlueSolstice wrote:
Jul 9th, 2019 10:17 am
I think BCNDP promised $400 renter rebate during campaign, but that did not happen during first budget. Horgan promised it would happen by end of his term:
https://globalnews.ca/news/4026705/bc-n ... ate-grant/

Personally, I think it would just drive rent up further.
I don't think it would drive rent up considerably at all, particularly if it was a non-refundable tax credit. How many landlords will say to a tenant... you're getting $400 from the government, so I'm going to raise rent by $30. That's like a renter saying can I get a discount on my rent, since you're getting the Home Owner's Grant and I'm living in the property, not you?

When you don't see something you tend not to take it into account. How many people actually think about the true cost/km of driving to avoid tolls? What you don't see you don't take into account.
I'd love to write history... in advance.
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adamtheman wrote:
Jul 9th, 2019 11:22 am
"The proportion of foreign buying in the region has gone from roughly one in every eight transactions before the tax, to one in every 60 this May."

Uh oh
Correlation is NOT causation

Article's behind a paywall, but I question those statistics, or even the relevance of those stats personally... I find when it comes to real estate, very little of it is actually trustworthy. Most of the time, the numbers are picked and chosen. I wouldn't doubt there's an overall reduction in foreign buyers, but there's also a massive reduction in buyers in general. And when prices go down, the FIRST people to stop buying are investors.... local or foreign. The only properties that tend to move in a declingin market are those that MUST buy... like they're upsizing or downsizing or dying or whatever... and the VAST majority of those people are LOCALs. In a hot market, investors are attracted... whether that's LOCAL or FOREIGN.

Few people talk about all the Canadian foreign buyers who bought into Phoenix when the dollar was at par. It was a sizeable amount. And a few swooped in once the market collapsed as well... Investors are attracted to markets going up because they can buy and sell and earn profit. The pool of global investors is OBVIOUSLY larger than the number of residents.
I'd love to write history... in advance.
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Sr. Member
Dec 30, 2012
886 posts
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Toronto
BlueSolstice wrote:
Jul 9th, 2019 10:17 am
I think BCNDP promised $400 renter rebate during campaign, but that did not happen during first budget. Horgan promised it would happen by end of his term:
https://globalnews.ca/news/4026705/bc-n ... ate-grant/

Personally, I think it would just drive rent up further.
I don’t see how renters being $400 richer will increase demand and push rents up. You think the renter pool will swell just to get that $400? lol

And the real consequence of this rebate will be that all the landlord tax cheats will be instantly exposed. A smart tenant who knows the landlord isn’t declaring the income could cut a deal - demand a rent reduction in exchange for NOT declaring on tax return for the rebate.

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