Analyzing the Effects Caused by the New Property Tax on the Vancouver Real Estate Industry

Memo

To: Raymond Li, Executive Vice-President, Aspac Developments

From: Jing Liang, Student, Kwantlen Polytechnic University (KPU)

CC: Marsha D’Angelo, Instructor, Kwantlen Polytechnic University (KPU)

Subject: Analyzing the Effects Caused by the New Property Tax on the Vancouver Real Estate Industry

Date: September 30, 2016

Introduction

The purpose of this memo is to analyze the issues caused by the new additional property transfer tax for non Canadian residents in British Columbia and the effects on a local real estate development company. A three-stage communication process is required by the Advanced Communication class at Kwantlen Polytechnic University to conduct the project proposal. At the first stage of the communication process, the issues and impacts caused by the new B.C property transfer tax will be presented in this memo. Recommendations will be provided in the recommendation report at the end of this semester.  

Background

Aspac Developments is a Vancouver-based developer. The company has been dedicated to creating high-end luxurious properties for many years and has plenty of expertise in constructing the waterfront residential property. They always work on quality in pursuit of excellence. (About us, 2016, para.1)

The company was first found in Vancouver, British Columbia, in 1993 (About us, 2016, para.1) and started their first project in the Vancouver Downtown Coal Harbour area back in the late 90s. The company has successfully transformed the land from railway yards which located at Coal Harbour to the best well-known world-class waterfront residential community in Downtown. According to the company’s website, they “envisioned an upscale new neighborhood that would be a mix of residential, office, hotel, retail and service space centered on an active and vibrant waterfront” (About us, 2016, para.2). 

As the last building in Coal Harbor was completed in 2013, the company move on to Richmond and to start their most recent and ambitious project: River Green. (Aspac Community Brochure, 2014, p. 9). For the River Green project in Richmond, it consists of 27 acres of land which was purchased by the company in 2007 (Project Master Plan, 2013, p. 4). The community has the best location in Richmond. It located in a place where is near to the Olympic Oval and stretch across the Fraser River providing 1.1 kilometers of riverside trails and the best water view to the residents (Project Master Plan, 2013, p. 4). Sales facilitators mentioned that the project will be developed in many phases for approximately 20 years. The company announced that 1 River Green has completed and sold out by 2015 on its newspaper advertisement, and is recently selling the first two towers of 2 River Green (2 River Green Max Collection, 2016, para. 2). Based on my observations, only one-third of the entire land has developed to date, which means that the rest of the property are vacant.

Situation Description

In the summer of 2016, the B.C. provincial government introduced an additional 15 percent property transfer tax to overseas investors. The new property tax took effect starting August 2, 2016 (Ministry of Finance B.C, 2016, para.1). It is an additional tax that aims at the foreigners who purchase residential properties in the Greater Vancouver District.  The provincial government hopes to cool down the exponential growth on housing prices in the Lower Mainland and to reduce the negative impacts from foreign investments with the additional tax.

Simon Lo, the Sales Director of the River Green Project, believes that “the real estate industry in the Greater Vancouver District would not cool down by the additional tax. The main purchasing power do not only compose of oversea buyers but mostly of local residents” (S. Lo, personal communication, September 27, 2016). He also indicated that the number of houses sold might be dropping off for a short period but will eventually go back to the original level.

Although the additional property transfer tax is intended to be the answer to Vancouver residents’ complaints of unaffordable housing, it has negative impacts on the real estate industry as well as the economic environment. Many has withdrawn from the home purchasing market due to uncertainty caused by the new legislation. For example, one of the real estate developers, Aspac Developments, is not only facing challenges on selling their presale condominiums, but the added tax may also influence demand which could alter future development plans.