Foreign purchases of Vancouver homes remain cool in wake of tax

A real estate for sale sign is pictured in front of a home in Vancouver, British Columbia, Canada, September 22, 2016. REUTERS/Ben Nelms/File Photo

VANCOUVER (Reuters) - Foreign buyers continued to scale back Vancouver-area property purchases in October after British Columbia introduced a tax on international investors aimed at cooling the city’s red-hot housing market, data from the Canadian province showed on Tuesday.

Overseas investors made up 3 percent of home sales in October in Metro Vancouver, according to data from the province’s finance ministry. That was slightly higher than 1.8 percent in September but well down from the 13.2 percent between June 10 and Aug. 1, the period before the tax took effect.

British Columbia introduced the 15 percent foreign property transfer tax effective Aug. 2 in an effort to improve affordability in Canada’s most expensive property market.

The provincial government acted after many residents and housing advocates complained that foreign buyers, especially from China, were driving up prices and making homes unaffordable for local people. Critics of the tax have said it is unfair to existing property owners and will hurt the economy.

About 140 residential property transfers valued at C$115 million ($85.62 million) involved foreigners in the Vancouver area during October, the province said. That was out of a total of about 4,700 transfers valued at C$3.6 billion.

Some 431 property transfer tax returns, totaling $36 million have been filed in the period since the tax was introduced until Nov. 14, the province said. As part of its compliance process, 215 audit files have been opened to investigate if additional taxes should have been paid.

The province said it was closely monitoring foreign house purchasing data from an area on the southern tip of Vancouver Island, which includes the province’s capital, Victoria where 10.3 percent of the value of transactions was due to foreign purchases. The property tax does not apply in this area.

Data out earlier this month showed overall Vancouver-area home sales fell nearly 40 percent year-to-year in October in the wake of the tax.

($1 = 1.3431 Canadian dollars)

Reporting by Nicole Mordant in Vancouver; Editing by Marguerita Choy