B.C.’s foreign buyers’ tax does not discriminate against foreign buyers, particularly Chinese ones, B.C. Supreme Court ruled in a class action suit Oct. 25.
Justice Gregory Bowden said while the majority of property transferees after the tax was enacted in August 2016 through November 2017 have been citizens of Asian countries, particularly China, it doesn’t mean the tax adversely affected Asian buyers in particular.
“It is not a numbers game,” he said. “Buyers from Asian countries, such as China, receive equal treatment that is proportionate to the demand from those countries.”
Bowden said purchasing property is not necessary for immigration to Canada.
“The tax does not prevent a foreign person or alien from immigrating to Canada nor does it alter the rights of a foreign person to immigrate to Canada,” Bowden said in his ruling.
The tax, contained in the Property Transfer Tax Act, imposed an additional 20 per cent levy on a transferee of residential property in the Greater Vancouver Regional District (GVRD) if the transferee is a “foreign entity.”
Representative plaintiff Jing Li argued the tax is beyond the scope of British Columbia’s legislative capacities and violated constitutional equality rights.
The Burnaby resident is a citizen of the People’s Republic of China. She moved to Canada in 2013 to complete a master’s degree in public administration at the University of Saskatchewan later moving to B.C.
In July 13, 2016, Li bought a residential real property in Langley for $559,000 plus $27,995 GST. The tax kicked in that August with Li owing an additional $83,850 as she was neither a permanent resident of Canada nor a citizen.
Bowden said neither side disputed there has been a Vancouver region housing affordability problem a number of years, reaching a serious level in 2016.
“In the 12-month period leading up to July 2016, the price of a single-family home increased by almost 40 per cent. Over the same period the price of condominiums had increased by 30.9 per cent,” Bowden said. “Home ownership in Vancouver became less affordable than all other cities in Canada. Vancouver had become one of the most unaffordable real estate markets in the world. By July 2016 the average benchmark price of a single-family home in Vancouver was close to $1.2 million.”
Further, Bowden said, the growth in incomes in the region hasn’t matched the increase in housing prices.
The judge noted concerns that foreign capital was responsible for high levels of house price inflation and increased affordability, other jurisdictions around the world imposed taxes or purchase restrictions on foreign buyers of real property. “Hong Kong, Singapore, Israel and three Australian states each introduced higher rates of property transfer tax or stamp duties applicable to foreign buyers,” Bowden said.
“The view that foreign nationals significantly contributed to the escalation of prices of housing in the GVRD is neither a stereotype nor a continuation of racist policies from the past,” he said. “The experts have agreed that the inflow of foreign capital has significantly contributed to price increases in the GVRD.”
But, Bowden said, prior to June 2016 there was little on the extent of foreign property buyers and their influence on regional housing prices.
“The results of the first full month collection of data showed that 9.7 per cent of residential real estate transactions in the GVRD involved foreign nationals,” Bowden said. “This represented a transactional value of $885,393,373. In the City of Vancouver the percentage was 10.9 per cent, 17.7 per cent in the City of Burnaby and 18.2 per cent in the City of Richmond.”
The judge said the tax’s “dominant purpose was to discourage and deter foreign nationals from purchasing residential property in the region.
“The raising of revenue was secondary particularly because the less revenue the tax raised the more successful it would have been in deterring foreign nationals from buying property,” he said.
Li asserted the tax’s aim is to regulate the rights of aliens, the legislative reserve of Parliament.
Further, she claimed, Chinese nationals mainly feel the tax’s effect because they prioritize the acquisition of residential real estate early in their immigration process.
However, Bowden said, the tax does not prevent foreign nationals from buying real estate or deter people from immigrating.
On the equality issue, Bowden said there’s no distinction impacting purchasers of B.C. property who originate from or are citizens of specific countries such as countries in Asia.
“The tax applies equally to all foreign nationals regardless of citizenship or country of origin,” he said.