The industry calls on the government to facilitate the foreign buyer ban

The debate over foreign buyers in the BC real estate market continues to rage on as developers and industry stakeholders push for changes to the current regulations. The issue of foreign purchases has been a contentious one for many years, with policies ranging from taxes to outright bans being implemented to curb the influx of non-resident investors.

The current situation in BC sees a 20 percent tax on foreign buyers, as well as a temporary ban on purchases of foreign property that was extended for another three years in January 2024. This has had a significant impact on the presale condo market, with developers feeling the pinch and calling for a reevaluation of the restrictions.

In a recent open letter to government officials, developers highlighted the fact that non-residents make up a significant portion of investors in cities like Vancouver. According to data from the Canadian Housing Statistics Program, non-residents accounted for one in 10 buyers of newly built apartments in Vancouver between 2016 and 2022.

Industry insiders argue that the current restrictions are hindering the market and the economy as a whole. They are calling for policy changes that would stimulate growth and provide much-needed support to the construction industry. The letter to government officials was signed by prominent development companies such as Amacon, Beedie Living, and Polygon, among others.

Neil Chrystal, President of Polygon, emphasized the importance of maintaining demand in order to drive supply and support the economy in the long term. He expressed concerns about the impact of the current regulations on the wider economy and called for exemptions to be made for certain developers.

However, not everyone is in favor of loosening the restrictions on foreign buyers. Ron Usher, former General Counselor of the Society of Notary’s Public of BC, warned that existing laws must be upheld to prevent money laundering and tax evasion. He called for stricter enforcement of transparency laws to ensure that all real estate transactions are reported to the appropriate authorities.

As the debate over foreign buyers in the BC real estate market continues, it is clear that there are no easy solutions. Developers and industry stakeholders will need to work closely with government officials to find a balance that supports economic growth while safeguarding against potential risks. Only time will tell what the future holds for foreign buyers in BC’s real estate market. Developers in Canada are facing a challenging financing system that requires them to sell around 70 percent of a building in advance in order to obtain construction financing. This means that developers are reliant on finding investors who are willing to wait several years for the building to be completed. While this system may be investor-friendly, it often results in small units that may not be suitable for many end users.

“Why do we design a housing system that requires all these investors, whether it is abroad or locally?” asked Mr. Geller. “And the problem as I see it is [the system is] resulting in all these suites that in many cases people don’t really want.”

Ross McCredie, founder of Sotheby’s International Realty Canada, and Chief Executive Officer of Sutton Group, expressed concerns that the relaxation of regulations on foreign buying does not stimulate job creation or kick-start construction.

“It’s too late,” said Mr. McCredie. “I feel bad, because many developers were reliant on this model, paid too much for land, and now face challenges with presales due to government interventions.”

He emphasized the need for all levels of government to come up with a comprehensive plan for employment growth and focus on housing options outside expensive urban areas.

“We don’t think big anymore,” he added.

Overall, the current financing system in the Canadian real estate market poses challenges for developers and investors alike. It may be time for a reevaluation of the system to ensure that housing options are both investor-friendly and cater to the needs of end users.