The CFIPPA [1] is clear on the subject:
1. Each Contracting Party shall accord to investors of the other Contracting Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the expansion, management, conduct, operation and sale or other disposition of investments in its territory.
Perhaps the claim is that the initial purchase of the asset is what's being taxed, which might be seen as exempt?
[1] http://www.international.gc.ca/trade-agreements-accords-comm...
1. Each Party shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
2. Each Party shall accord to investments of investors of another Party treatment no less favorable than that it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
Canada has carved out some exemptions, specifically around ocean front property [2], probably intended for the control of ports.
[1] http://www.international.gc.ca/trade-agreements-accords-comm...
1. “investment” means:
(a) an enterprise;
(b) shares, stocks and other forms of equity participation in an enterprise;
(c) bonds, debentures, and other debt instruments of an enterprise;
(d) a loan to an enterprise
(i) where the enterprise is an affiliate of the investor, or
(ii) where the original maturity of the loan is at least three years;
(e) notwithstanding sub-paragraphs (c) and (d) above, a loan to or debt security issued by a financial institution is an investment only where the loan or debt security is treated as regulatory capital by the Contracting Party in whose territory the financial institution is located;
(f) an interest in an enterprise that entitles the owner to share in the income or profits of the enterprise;
(g) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution;
(h) interests arising from the commitment of capital or other resources in the territory of a Contracting Party to economic activity in such territory, such as under
(i) contracts involving the presence of an investor’s property in the territory of the Contracting Party, including turnkey or construction contracts, or concessions to search for and extract oil and other natural resources, or
(ii) contracts where remuneration depends substantially on the production, revenue or profits of an enterprise;
(i) intellectual property rights; and
(j) any other tangible or intangible, moveable or immovable, property and related property rights acquired or used for business purposes;
but “investment” does not mean:
(k) claims to money that arise solely from
(i) commercial contracts for the sale of goods or services, or
(ii) the extension of credit in connection with a commercial transaction, such as trade financing, other than a loan covered by sub-paragraph (d); or
(l) any other claims to money,
that do not involve the kinds of interests set out in sub-paragraphs (a) to (j);
Disclaimer: I'm not your lawyer. I know nothing about Canadian law. I am a dog pretending to be a lawyer on the internet.
Second, I'm not a lawyer either, but it seems as a Canadian property investor, you could make your case with several items in the above list:
(f) an interest in an enterprise that entitles the owner to share in the income or profits of the enterprise;
(g) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution;
Both of those items might be satisfied by having a shell corporation buy the property for the human buyer, who's invested the necessary funds in the corporation.
Furthermore, I don't see how your objection about "property" unqualified referring to chattel could withstand this, which is probably very easy to argue for as long as the buyer rents out the property:
(j) any other tangible or intangible, moveable or immovable, property and related property rights acquired or used for business purposes;
There was a website called something like "crack house or million dollar Vancouver home" because knock-down quality bungalows were selling for over a million dollars there.
As an anecdote, I was looking for a new rental place in the past month and I've never seen such a landlord's market. Craigslist posts that disappeared after hours, bidding wars, 10s of desperate people showing up for a not-so-ideal place, and the overall treatment of applicants were very good signs of rock-bottom vacancy rates. Applying for a rental looked a lot like a job interview.
In a lot of instances 'free-trade' agreements exist to help the mega-rich, this seems like a perfect example.
It may be the only way to gauge impartiality is when everyone is equally offended.
Canada
http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-...
http://static5.businessinsider.com/image/54aea0136da8118f2ae...
Australia
https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAAC...
http://www.propertyobserver.com.au/images/stories/keenjan2.p...
The larger impact will be on locals thinking "this is the end of chinese money, so the market will tank!", which will scare them away from the market.
For the longest time, the ruling provincial party was of the opinion that this was not a problem and high property prices was due to the strong economy (circular logic, as real estate & construction are the drivers of that.) They were getting pretty hammered in polls. On top of that, they cited a ~5% ish foreign purchaser number based on 19 days of data, only to then bump it to 10% conveniently on the release of new data a day or two after introducing this 15% tax...so yea. It's a disaster.
In a lot of ways Vancouver has been ruined by the housing bubble and influx of speculative foreign capital. Extremely high house prices have created a strong incentive for anyone who can easily work elsewhere (ie. a tech worker) to move away. Many of my friends have drifted away to Seattle and SF.
The only way houses could become even slightly affordable at this point would be a housing crash. This would be disastrous to the local economy, which has become entirely built on selling housing to one another. Accordingly it's hard to wish for that.
Basically the people buying it don't deam the return on renting it worth the risk of a bad tenant or worth the hassle.
They don't need cashflow, are either using it as a safe holding of value or as a quick escape property if they need to leave insert country here for political reasons.
It's happening the world over.
Make it look like we doing something, at the same time raising additional budget with the tax surplus.
I think it's too little very late.
15%tax on illicit funds is just cost of doing business ( with says around it too).
Quote from a localasian realtor to me: "now my client can't buy the 9million dollar house he wanted for investment cause of tax." in one scenario
My uncle, a Vancouver real estate agent, was talking about how the market had all but halted it's growth just a few months before this change was announced.
I'm not informed enough to know for sure, but I'd guess this is the provincial government trying to take credit for that slowdown after the fact.
But some might say this will drive property prices down? Mission accomplished!
Is it because it's bad for real estate in a living city to be used as an investment vehicle?
Foreign investors drive up costs for locals. Locals unhappy, add tax for foreign investors. Foreign investors potentially wronged because of various agreements Canada has joined limiting protectionist actions like these.
Or read the article, that'll answer your question.
I don't know why you believe this to be true but it isnt
If it passes legal muster, the threat of losing your property is probably enough to dissuade a lot of foreign investors.
The good thing is this kind of law can be adjudicated, unlike the tax. Because you can go before a judge/mediator and argue that you use the home as a residence.
The current tax scheme just hurts foreigners that live and work in Canada, not the people who buy up million dollar properties (which is exactly who the law intends to target).
The existence of enormous wealth inequality means a few billionaires can easily scoop up all the available property on the market in San Francisco, and thus the housing price is extremely vulnerable to speculation. Since land is the most valuable thing you can own, and thus the most lucrative thing to speculate on, I am sure this is happening.
Here http://voxeu.org/sites/default/files/schularick_fig1.png is a figure from a recent paper showing a dramatic rise in the price of housing since 2000. The authors of this paper again conclude that something about movement or building or zoning needs to change.
I disagree. To me it is obvious that this shift after 2000 is the result of speculation. Specifically, we know that the Commodity Futures Modernization Act of 2000 opened up a vast new derivatives market in the hundreds of trillions of dollars. This market contributed to a series of enormous bubbles and speculative bursts - e.g. the energy market speculation that Enron caused, and later the housing bubble that destroyed the global economy, still ongoing.
It seems obvious to me that the sudden and dramatic rise in land price is at least partially, and probably mostly, related mostly to derivatives and speculation. We didn't change much since 2008 - it stands to reason this would still be ongoing.
It is also my belief that the recent push to "build build build" and "rezone" in SF is a result of this speculative putsch, which wants new and valuable property in SF to make good on the bubble of speculation.
Since this bubble is driven by billionaires in tight markets (not poor people being given fraudulent mortgages nationwide), it's probably harder to see and pop. But I really, really wish people were paying attention to this more. We haven't learned the lesson of 2008 - things have changed, and not for the better.
If rich foreigners are buying property to summer in because they like the weather, then not a bubble. If rich foreigners are buying property because the property has gained X% in price every year for the last ten years but they don't know anything about the specifics of the local real estate market, then more likely a bubble.
You also can't say something is a bubble until after it pops.
So there's no risk of them being forced to sell at the bottom, like what happened to Americans, because there will be no 5/1 ARM that needs to be refinanced. Since these buyers paid in cash, so most of them will be able to weather a storm.
It's been like that for the last 8+ years.
You really should include a link to this as well- Real Estate Board of Greater Vancouver MLS Home Price Index http://www.rebgv.org/home-price-index?region=all&type=all&da...
This shows the the price trend of Detached, Townhouse, and Apartment up to the last 11 years, broken by individual cities in Greater Vancouver.
But it is misleading. If you look at Metro Vancouver's trend, all 3 types of housing have gone up in prices. But if you look at the surrounding cities, only the Detached and Townhouse prices have gone up. Apartment pricing have remain relatively flat until 15 months ago. Since then Apartment price have gone up as well.
This is probably because 15 months ago, the Detached/Apartment pricing have increased to the point where buyers started to consider Apartment as a viable resident.
PS. If you look at the graph, you will notice that the prices have gone up so much it broke the graphing software.
There should be a rule on HN that whenever someone calls a bubble, they must also share an estimate on how long the bubble has been building, when it will burst, and how to profit from said bubble. They should also have to disclose whether or not they have any skin in the market of the supposed bubble asset.
> The release defines foreign corporations as companies "not incorporated in Canada or, incorporated in Canada, but controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange."
It remains to be seen how much effort will go in to enforcement re: determining the ultimate ownership of companies investing in Vancouver real estate.
> According to a release, the government defines a foreign national as someone who is not a Canadian citizen or permanent resident, "including stateless persons."
Presumably your sister has permanent resident status and is exempt from the new tax because of that.
http://www.cbc.ca/news/canada/british-columbia/metro-vancouv...
[1] http://www.theglobeandmail.com/real-estate/vancouver/ten-yea...
I'm sure there is speculation going on in the market, but we can't tell to what degree without polling the people buying real estate.
Once you sign a lease you and roll on month-to-month it's unlikely you will be evicted. Landlords either need to sell the property or move into it themselves to get the property back.
You're right that you could use (f) and (g) to sidestep, but an interest in an enterprise is something resembling equity. So yeah, set up a domestic shell corp, capitalize it, put your real estate in it, and that's probably good to go - I'm generalizing, but you're right. But being able to structure around a particular tax is not the same as the particular tax not applying or not existing. If for whatever Canadian legal reasons liability pierces the entity and goes back to the principals, you have a tax problem. I'm sure there are ways to structure around that as well, but again, I'm way out of my element on Canadian law.
As for (j) that's going to depend on whether Canadian law interprets "immovable property" as real property or not, and then what constitutes business purposes. I'll venture a guess that if a foreigner buys a home, assuming immovable property = real property for (j), and rents it out at market rates at arms length, that's okay. Buying it so their kids can live in it, or "renting" it to relatives or anything other than market rate and arms-length is probably less okay.
I also don't know enough about Canadian jurisprudence and the propensity to enforce the spirit of a law rather than the black letter. So basically I'm a dog pretending to be a Canadian lawyer on the internet. But those are the issues to me. It's certainly arguable from both positions.
- Prefix each line with ">".
- Surround the quotation with triple quotes, like Python:
"""
My long quotation
"""
As someone else said, it's only a bubble when it pops. Good luck timing that.
- That is not correct. Vancouver proper is hampered re: expansion because of mountains and sea. It has limited availability of lands for development. Only way it can meet demand for housing is via vertical (i.e. condos) vs. horizontal (i.e. houses) ecpansion. But there is substantial local resistance to highrises, especially outside the downtown/west end area.
Foreign money is a real problem, there is no way around it. If you want your city's housing market to be a wide open safe haven for everyone in the world to park their money in, you're going to push out the locals because these investors' demand for housing does not increase locals' incomes, it only increases housing prices.
In Canada this problem is especially bad because of immigration loopholes for the rich. For vast majority of Vancouver properties it actually costs less to buy permanent residency via Quebec's immigrant investor program (~$100K in interest payments, no other requirements) than to pay this stupid 15% tax. Just let that sink in for a minute.
I live in Geneva, Switzerland. We are welcoming rich immigrants.
For example, just one of the many problems – a foreigner buys residency ($100K paid to Quebec, not BC), buys a house here, then continues to run his business in China, while their family moves into the house full time. Then their family uses up social services like universal healthcare, public schools and universities, while collecting low-income tax rebates because the breadwinner is not a Canadian tax resident, and does not need to declare their global income.
That's not some thought exercise, it's a very common occurrence here. So the rest of Canadians end up paying taxes to finance all this, and get inflated housing costs as a bonus. I don't see how that's a good outcome.
I've no idea how things work in Switzerland, but they don't work in Canada with our current laws.
