http://www.theglobeandmail.com/report-on-business/how-other-countries-have-tried-to-deter-foreign-real-estate-investors/article31128696/?reqid=16a8c907-8755-4b82-a698-0113d7f68337

Borrowed from the Globe and Mail!

British Columbia joins a growing list of regions around the world that are restricting foreign investment and speculation in their housing markets. Here are measures taken in six other countries to cool house prices.

Australia

Australia has barred non-resident investors from buying resale houses unless they plan to live there full-time. The country’s Foreign Investment Review Board requires international buyers to apply for permission to purchase or build new houses and charges fees to prospective investors that increase with the price of the house. Foreigners who break the rules could face jail time, while real estate agents who help clients bend the rules face steep fines.

The Australian government has also forced some foreign owners – including Canadians – to sell properties that do not qualify under the new rules. The rules temporarily slowed the housing market, but prices have rebounded, economists from Toronto-Dominion Bank wrote.

New Zealand

Grappling with a surge in prices in its largest city, Auckland, New Zealand’s central bank introduced measures late last year requiring property investors in the city to have deposits of at least 30 per cent. The Reserve Bank is now proposing to expand those rules to the rest of the country.

Opposition leaders have begun calling for the government to ban offshore buyers, while some of the country’s major banks said last month they had started to refuse mortgages to borrowers without New Zealand-based income.

Explainer: Everything you need to know about real estate reform in B.C.

Britain

Last year, politicians in Britain sought to close a tax loophole that gave foreign property investors an advantage over local buyers. The government now requires all investors to pay capital-gains taxes as high as 28 per cent when they sell houses that are not a full-time residence. Previously, the taxes had applied only to British residents.

Lawmakers also unveiled increases to the land-transfer tax – or “stamp duty” – on purchases of investment properties. The moves have done little to curb foreign demand, with several real estate analysts reporting that interest from Asian buyers in British properties had soared since last month’s Brexit vote.

Singapore

Singapore has long restricted real estate purchases by foreigners, making it difficult for non-residents to buy anything beyond a condo. It has also tried to curb speculation by imposing extra taxes on buyers who sell their houses in less than four years and extra fees for those buying second homes. Since 2013, foreigners have faced an extra 15-per-cent tax when they buy a house.

Switzerland

In 2013, Switzerland imposed restrictions on property investment, limiting the number of properties deemed to be second homes to 20 per cent of the housing stock in any community. Those rules are on top of existing restrictions for foreign investors from outside the European Union, who can buy only a limited number of houses in the country each year.

Hong Kong

Some commentators have referred to British Columbia’s move as a “Hong-Kong-style tax” because it echoes the 15-per-cent tax that Hong Kong introduced in 2012 on house purchases by non-permanent residents and companies. Buyers who sell within three years pay as much as 20 per cent in extra taxes.

Foreigners are barred from buying houses in certain neighbourhoods. In mainland China, foreigners must spend at least a year in the country before they are allowed to buy real estate, and are restricted to one house purchase until they have become permanent residents.

Re:  Property Transfer Tax

We just heard that the BC government is increasing the PTT by 15% tax for purchasers who are foreign entities.  Here is what we know:

1.A foreign national is one who is not a Canadian citizen or permanent resident.  If it is company that is purchasing, a foreign company is one that is not incorporated in Canada, or incorporated in Canada but controlled in whole or in part by a foreign national or other foreign corporation;

2.The increased tax only applies to properties in the Greater Vancouver Regional District, and does not apply elsewhere in the Province, or the Tsawwassen First Nations Lands;

3.The tax only applies to residential properties, not commercial;

4.This is in addition to the regular PTT to be paid, and is paid on closing;

5.The increased tax is effective August 2, 2016, regardless of when the contract is signed.  Even if the contract was signed weeks ago, if it completes after August 2, 2016 there is a higher tax;

6.We need to confirm the clients SIN number and compare it to an official government document, such as a passport or SIN card.  Prepare your clients to have such ID;

7.The additional tax is payable even if there would normally be an exemption available.  Transfers between related individuals, transmission to surviving joint tenant and other such items now attract the additional tax. 

Once we receive further details we will do our best to keep you posted.

PS. If you have a file closing over the next week or two you should try to move it up to this week. If your client’s lawyer cannot accommodate this, let me know.

Tony Spagnuolo, Barrister & Solicitor

Spagnuolo & Company Lawyers

#300-906 Roderick Avenue

Coquitlam, BC V3K 1R1

Direct Phone: 604-777-7406

Fax: 604-527-8976 

Quick Links… www.spagnuololaw.com and www.bcrealestatelawyers.com

What if Canada was heading into (or remained for that matter) in a zero interest rate, flat rate, no chance of increase for foreseeable future environment?

A recent trade article shared this view from an industry broker:

The Bank of Canada won’t let sky-high housing prices deter it from cutting rates – what would that mean for key real estate markets? One former banker and current broker weighs in.

“From a Vancouver perspective, I don’t know that that would make a huge difference,” Ric Wilson, a broker with Mortgage Architects in Vancouver, told MortgageBrokerNews.ca. “They’re already at record lows; another $10 dollars a month per $100,000 [in mortgage cost] won’t change things very much.”

Further rate cuts could be nigh – despite ever-boiling real estate prices in two Canadian markets and the fact that the current overnight rate target sits at 0.5%.

“I don’t think of it as something that blocks us from changing interest rates,” Poloz recently told the Washington Post when asked whether exposures related to housing would deter the Central Bank from future interest rate cuts.

That may surprise some brokers, as record-low interest rates are often cited as a driving factor behind the historically hot housing prices in Toronto and Vancouver.

The Bank of Canada’s target rate was slashed to 0.5% in July of last year, and it currently sits at that mark. That’s the lowest it’s been since the great recession, when it was cut to 0.25%.

But it could go even lower.

“My past life is as an VP at a bank. I think the Western world is stuck in the need for heavy deleveraging and as much as central bankers talk a big game … I think we’re almost in a Japan-like cycle of decades of low interst rates to accommodate debt servicing,” Wilson said. “I can’t guarantee it, but I can’t see the room to raise interest rates without causing major economic calamity. So bankers talk a good game because it’s prudent.”