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Mike de Jong, B.C.’s finance minister, recently and unexpectedly announced an additional property transfer tax of 15 per cent on foreign nationals purchasing residential property in Metro Vancouver. Whatever the merits of this policy, many have overlooked a troubling element of its implementation that it will be effectively imposed retroactively.

The tax applies to property sales agreed to before the Aug. 2 deadline but not yet registered with the Land Title Office. This means that some contracts forged under one set of rules are now affected by a new set of rules (the new tax) even though these transactions occurred before the tax was announced. This tax will add roughly $140,000 to a typical Greater Vancouver real estate transaction, closed before the imposition of the tax. This is after de Jong had previously stated strong opposition to such a policy.

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The retroactive nature of the tax is especially problematic when it comes to pre-sale homes, which often involve the signature of contracts well before these units can become occupied. The Urban Development Institute estimates that the tax could jeopardize as many as 3,000 pre-sale deals involving foreign nationals, hurting local sellers as much as foreign buyers. Every transaction has two parties, and both sides will be harmed by this measure. For instance, a family that has sold their home, having already bought a new home, might find themselves scrambling to resell, and possibly at a lower price than originally budgeted for. Indeed, there are already early signs of sellers discounting home prices to blunt the tax’s effect.