Aerial view of the Vancouver skyline.
British Columbia’s surprise 15 percent levy on foreign property buyers may make it even harder for Vancouver to attract foreign talent and achieve its goal of becoming Canada’s Silicon Valley, reported Bloomberg.
In fact, the city already has two major disadvantages – some of the lowest wages and highest housing costs among North America’s emerging technology hubs.
“It’s a complete shock, a nightmare,” said Singaporean computer scientist Eric Kong, who is in the middle of relocating his family to Vancouver. “If I’d known this, we would’ve gone somewhere else.”
With a masters degree in finance, Kong is the kind of expatriate the city is trying to attract. The new tax, however, is sending his plans into a tailspin. He revealed that he needs an additional C$114,000 (S$117,000) in order to finalise a deal for a C$775,000 (S$797,796) house.
Cancelling his plans, on the other hand, would mean forfeiting his C$80,000 (S$82,365) deposit as well as his two daughters’ prepaid tuition. He would also have to find a new house in Singapore and buy a car, after the family sold the previous car.
Kong is not the only foreign buyer put out by the new tax. The influx of deals being rushed through prior to the Tuesday (2 August) deadline saw the regional land title office extending its hours through a holiday weekend. On Monday, it also started accepting faxed applications until 11 pm following technical glitches on the online system.
Buyers who are not permanent residents or Canadian citizens are required to pay an additional 15 percent transfer tax for home purchases in Vancouver from 2 August, according to measures unveiled by the British Columbia government on 25 July.
“This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs,” explained Finance Minister Michael de Jong.
In need of higher incomes to match its cost of living, the city is trying to remodel itself from a 19th century lumber and mining town into a high-tech mecca for startups, financial services and animation design. Home to Hootsuite Media Inc, which is one of the few private tech companies in Canada to reach a US$1 billion valuation, the city saw its tech scene generate C$23 billion (S$23.67 billion) in revenue in 2014, revealed data from the Vancouver Economic Commission.
However, some in the city’s tech scene do not believe the new measures are strong enough.
“I know of many people who couldn’t afford to move to Vancouver because of the cost of housing,” said Dennis Pilarinos, who worked at Amazon.com Inc and Microsoft Corp before founding Buddybuild, whose software helps test products of mobile app developers.
“It’s a step in the right direction but I’m not convinced that it’s enough.”
Meanwhile, tech executives, such as Hootsuite CEO Ryan Holmes, lamented the flight of young talent due to the city’s unaffordable housing. In July, a single-family detached house in Vancouver went for C$1.58 million (S$1.6 million) on average, up 38 percent over the same period last year.
However, figures from the Real Estate Board of Greater Vancouver showed that sales posted its first annual decline in three years when it dropped 19 percent from July 2015 – indicating that demand may have peaked even before the new tax was announced.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
