Vancouver, British Columbia, residents will soon get a larger cut from the real estate shopping spree that's taking place in their city, courtesy of wealthy overseas buyers that are snatching up property there.
The British Columbian government on Monday approved a new 15 percent tax on foreign property buyers in metropolitan Vancouver, as a surge in real estate purchases by rich foreigners — particularly the Chinese — has caused many locals to say they've been priced out of the market.
The 15 percent tax takes effect Aug. 2 and will apply to "foreign nationals or foreign-controlled corporations."
Vancouver has become a haven for wealthy Chinese buyers looking to move their families and fortunes to North America. Between June 10 and July 14 alone, overseas buyers spent more than $1 billion on British Columbia property, according to the government.
Because of this surge in demand, prices in Vancouver have risen nearly than 30 percent over the past year. The average sales price of a home more than doubled between 2005 and 2015, to $1.6 million Canadian dollars ($1.2 million), according to the Real Estate Board of Greater Vancouver.
Local politicians have been facing growing complaints from middle-class Canadians that they can't compete with the wealthy Chinese, who are looking for a place to park their wealth. A recent government study found that 90 percent of foreign purchases in Vancouver were from the Chinese.
"Owning a home should be accessible to middle-class families, and those who are in a position to rent should be able to find a suitable home," British Columbia Premier Christy Clark said in a statement.
Some worry that rich foreigners will quickly find loopholes in the tax — for instance, by getting a local resident to purchase property for them. But the government said those who try to dodge the tax face up to two years in prison and six-figure fines.
Vancouver joins a growing list of countries or regions imposing new taxes on foreign buyers, according to the real estate firm Knight Frank. Australia imposed a new administration fee for foreign buyers last year, while Melbourne raised the stamp duty on foreigners from 3 percent to 7 percent.
Singapore likewise imposed a special tax of 15 percent on foreign property buyers in 2013, one year after Hong Kong did the same.
A proposed tax on second homes in New York City was quickly shot down by the real estate industry in 2014, after executives argued it would hurt jobs and the economy.