Canadian Lawyer

20 J U N E 2 0 1 7 w w w . C A N A D I A N L a w y e r m a g . c o m about providing shelter for people who live, work, pay taxes in your community." When British Columbia brought in its foreign buyers' tax, however, there were concerns that it was too sweeping, penalizing those recruited from other countries to Vancouver on work permits, some of whom hoped to become Canadian citizens, as well. That resulted in an amendment earlier this year. But there was criticism that the new rules came abruptly, allowing just a five-day window to close deals. "Needless to say, those five days were very busy," says Vancouver real estate lawyer Kenneth Pazder. Millions of dollars' worth of transactions went through during that period, but some deals that couldn't make the deadline were dropped. The new rules also attracted a proposed class action alleging Charter infringement. Pazder would have preferred a more gradual introduction of a foreign buyers' tax. And a grandfa- ther clause allowing deals already in place to go ahead would have made the transition easier, he adds. He also thinks new rules should have been introduced much sooner because much of Vancouver's resi- dential real estate is now largely out of reach for the average family. The end result, says Pazder, is a shutting down of the single- family housing market over $3 million. "The market here is still pretty brisk for anything under say $1 million, $1.5 million; it's still moving pretty well. But once you get over $2 million upwards, a huge percentage of that market was for- eign," he says. B.C. started tracking foreign property purchases prior to imple- menting its legislation, showing foreign ownership represented 10 to 13 per cent of sales. Early indica- tions in B.C. showed a significant chilling in foreign interest of single- family property immediately after the introduction of the foreign buy- ers' tax, dropping to one per cent in August and then climbing back up to 3.5 per cent. Volume of sales also dropped 40 per cent from the previ- ous year and detached houses in the City of Vancouver dropped five per cent, to an average of $2.67 million. But preliminary analysis by CMHC suggested that the B.C. mar- ket had started slowing down prior to the introduction of the province's foreign buyer's tax. Bob Dugan, chief economist with Canada Mortgage and Housing Corp., says the true representation of foreign property purchases eludes officials in the rest of Canada, although Statistics Canada is expected to widen its data collection. CMHC has, however, included that information in its annual survey of condominium structures across the country since 2014. The latest survey showed 2.3 per cent of the condomini- ums purchased in Toronto were foreign buyers, 2.2 per cent in Toronto, 1.1 per cent in Montreal, 1.2 per cent in Halifax and the rest of the country's census metropolitan areas were less than one per cent. "What we do see is that buildings that have been built since 2010, the share of foreign owners is higher than the general stock," says Dugan. In Toronto, 3.9 per cent of condominium units constructed since 2010 were purchased by foreign buyers, which jumps to five per cent in Vancouver, with slightly higher rates in the downtown areas. Both those markets showed price acceleration and overvalu- ation — indications of speculative activity, adds Dugan. But he warned against any restrictions on foreign buyers in the absence of supportive data. Eby says there's still room for improvement. A Transparency International Canada report found a disconnect between the pur- chases of some of that city's most expensive houses and the income of the beneficial owners — many listed as homemaker, student, a trust or a numbered company. "So there's an obvious question about where that money is coming from in our real estate market," he says, adding there is also a role for the Canada Revenue Agency to play here. "At this stage of mobile flows of capital, it is negligent of government not to understand what is driving prices of land and property in our communities." R E A L E S TAT E Ontario's new rules Unlike the rollout of B.C.'s foreign buyers' tax, which allowed five days for deals to close, Ontario's new 15-per-cent tax exempts bind- ing agreements of purchase and sale signed by all parties prior to its introduction on April 20. Other details include: • It applies to noncitizens or permanent residents, taxable trustees and foreign cor- porations in the Greater Golden Horseshoe area stretching from just north of Orillia and Peterborough south to Niagara Falls and just west of Waterloo and Brantford; • One hundred per cent of the value of the consideration for the transfer is taxed if any one of the purchasers is a foreign entity; • Affected properties are those with at least one and no more than six single-family residences; • It doesn't apply when the purchase is part of a mutual fund trust, real estate investment trust or specified investment flow-through trust. Perfectbound • June 2017 $46* • L7798-7855 ISBN • 978-0-7798-7855-0 Multiple copy discounts available *Plus applicable taxes and shipping & handling (Prices subject to change without notice) Visit www.carswell.com or call 1-800-387-5164 for a 30-day, no risk evaluation Connect to Atlantic Canada's LEGAL NETWORK The 2017-18 Atlantic Legal Telephone Directory connects you to your legal community providing accurate and essential legal contact information in all four Canadian Atlantic Provinces. Get quick, easy access to: • Law and Barristers' Societies • Courts of Appeal • Federal Court of Canada • Incorporated Municipalities... and much more. ntitled-6 1 2017-05-12 11:21 AM

• Cover