OTTAWA—Foreign purchases of homes in Canada’s west-coast city of Vancouver, British Columbia, plunged after a new property tax for foreign buyers took effect at the start of last month, according to new data released Thursday by the province of British Columbia.
Sales involving foreigners accounted for about 1% of all Vancouver transactions during the month of August, when the tax was first applied, the province said. During the seven weeks before the tax came into effect, foreigners accounted for around 13% of all Vancouver deals.
British Columbia announced in late July that it would begin charging an additional 15% property-transfer tax for foreign home buyers in Vancouver, where home prices have soared in recent years. The tax, which applies to home buyers who aren’t Canadian citizens or a permanent residents, took effect Aug. 2.
The provincial government has said the policy is aimed at making housing more affordable for local residents. The benchmark price for a typical Vancouver home rose about 31% in the year through August to 933,100 Canadian dollars ($714,362) according to the Real Estate Board of Greater Vancouver.
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The province’s data also suggests many foreign buyers scrambled to move forward their closing dates in an effort to avoid the new tax, which was announced just one week before it came into effect. Foreign purchasers accounted for more than half of all deals that were registered on July 29, the last business day before the property-transfer tax took effect, the provincial data found.
Many Vancouver real-estate agents have complained that they weren't given more notice and that the tax was applied to transactions that were already under way. That meant foreign buyers who had earlier signed a contract to buy a home but couldn't close the deal before Aug. 2 were on the hook for the additional tax.
British Columbia began collecting data on foreign buyers of residential real estate earlier this year, amid growing worries about Vancouver’s rapidly rising home prices. Some residents and local politicians have blamed investors from mainland China, in particular, for making homes less affordable for people who live and work in the city.
An earlier survey by the provincial government, conducted in mid-June, found that people with Chinese citizenship accounted for about 90% of all foreign real-estate purchases in Vancouver during a three-week period under review.
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In its most recent study, the province said nearly 22,000 property transfers occurred in the Vancouver area between June 10 and Aug. 31, with 9.3% involving foreign nationals. Value-wise, foreigners accounted for 11.5% of the C$20.6 billion ($15.77 billion) of property transfers in Vancouver between June 10 and Aug. 31, the British Columbia study found. The new study didn't provide a breakdown based on the citizenship of foreign buyers.
The province said it plans to start releasing real-estate data monthly.