Why a foreign buyer exemption on new homes likely won’t do much for Vancouver, experts say

The federal government’s plan to exclude new homes from the foreign buyers ban could help to move some unsold inventory, but it likely won’t be enough to address B.C.’s housing crisis, according to some experts.

Mike Drummond, chief executive officer with the Urban Development Institute, said this week that letting foreign buyers purchase new homes while keeping the ban on existing homes is a “sensible change” at a time when Metro Vancouver’s new home market is in “its worst downturn in decades” and condo presales have dried up.

“It brings outside investment into new housing without competing with Canadians for homes that are already built,” he said.

“It won’t clear the unsold inventory on its own. Those homes are sitting empty because it now costs more to build than most buyers can afford to pay. Still, every sale helps. Projects need presales to secure construction financing, and a wider pool of buyers gives more projects a chance to get started.”

But Drummond and others say the effect of the new federal changes could be limited in B.C. unless the provincial government reconsiders some of its own legislation around foreign buyers, namely a 20 per cent surcharge on the standard property-transfer tax that applies to purchases in Metro Vancouver and other densely populated areas. Foreign owners are also required to pay a speculation and vacancy tax if the home is not owner occupied nor rented to a tenant for at least six months of the year.

Asked if they would consider exempting foreign buyers from B.C.’s additional property-transfer tax, the B.C. Conservatives, who are set to form government next week, said only they were reviewing the federal housing policy changes.

“Our commitment is to cut red tape, streamline approvals and work with municipalities to bring family-oriented housing to market in months, not years. We made clear commitments to British Columbians and our focus is on delivering them,” said a statement from a B.C. Conservative spokesperson.

“Once the new government is sworn in, the minister of housing will be in a position to provide further details.

The federal ban went into effect on Jan. 1, 2023.

The federal government is now proposing to allow foreign buyers to purchase new homes, while extending the current ban on the foreign purchase of existing homes until Jan. 1, 2029.

The proposed changes, outlined last week in the federal budget, are intended to encourage construction of new housing while protecting the affordability of existing housing, according to the federal government.

“This would help protect housing affordability by keeping the vast majority of the market available for Canadians, while unlocking additional investment in new housing supply. The federal government will propose legislation and launch a regulatory process on this change in short order,” a federal housing official said in an email.