B.C. realtors searching for loopholes as new foreign buyer tax comes into play next week

British Columbia’s new 15-per cent foreign buyer tax on residential real estate deals in Metro Vancouver hasn’t even kicked into gear yet, but realtors are already looking for loopholes in the surprise legislation that looks to curb demand from outside Canada.

The Real Estate Council of B.C. is investigating a top-selling realtor who suggested that his agency could help foreign buyers who have purchased presale contracts get around the new rules, which come into play August 2.

“Most of the presales bought in the last 24 to 36 months have seen significant increases in value,” Mike Stewart of Century 21 wrote in an email to clients, which was obtained by Postmedia. “It is possible in many cases to assign the presale purchase contract to a family member or friend who is a Canadian Citizen or Resident. For those of you who do not have that option, we may be able to sell the presale to a third party at a profit to you.”

Stewart did not respond to requests for comment from Yahoo Canada Finance but told radio station CKNW that his advice was directed at presale contracts still unregistered with the Land Titles Office.

“It is primarily a specific solution for a very specific situation,” said Stewart in an interview. “I want to be very clear I am not telling anybody about how to avoid a tax that is payable because that is illegal and that is not something that I do and that I am allowed to do.”

While Stewart told the news station that he believed those international buyers who have purchased pre-construction but still not registered at land titles are exempt. Premier Christy Clark insisted otherwise, saying there are no loopholes and realtors should be informing clients that “every single one of these transactions could be audited, and anybody trying to find loopholes is going to discover very quickly that those loopholes don’t stand up.”

Thomas Davidoff, an economist at UBC’s Sauder School of Business, has been tracking Vancouver’s housing affordability woes closely, even tabling a paper in January along with a team of nine academics from both UBC and Simon Fraser University calling for a 1.5 per cent property tax surcharge designed so homeowners living on the property and paying income taxes in the province would be exempt.

He says the so-called loophole of a non-citizen wiring funds to a trusted friend or family member who is a permanent resident or Canadian citizen to buy a house in their name isn’t unheard of.

“It certainly goes on already because you want to declare something as your primary residence, so having somebody here makes that more believable so that when you sell it you don’t pay capital gains tax,” he says.

Davidoff points out that while the foreign purchasers’ property transfer tax is a different approach than the one he tabled, it ultimately will achieve a similar effect of slowing down demand from outside Canada. It doesn’t bode well for realtors however, who have been cashing in big on the swelling real estate prices.

“I think realtors are worried, I think they think it’s going to cool down the market,” he says. “And I think people who have been calling for the government to do something so that people who live and work here can afford homes are generally pretty pleased – this will soften the market… but how much is just so hard to know.”