Several of Vancouver's construction industry stakeholders have penned a letter to the province citing concerns over a new foreign homebuyers' tax and how it was implemented.
"There is a potential for a ripple effect," said Fiona Famulak, president of the Vancouver Regional Construction Association (VRCA). "We have respectfully asked the government to consider amending the legislation and to engage the industry as to how best to rollout a tax so that it's a win, win."
The VRCA, in partnership with the Mechanical Contractors Association of BC and the Roofing Contractors Association of BC, sent a letter to Premier Christy Clark and other government officials citing their concerns about the new tax.
The letter explained that the lack of grandfathering provisions for pre-sales that existed prior to the Aug. 2 implementation of the tax and the absence of consultation with the industry were concerning.
"Collectively, we applaud your government's commitment to addressing the escalating Greater Vancouver real estate market, into which it has become increasingly difficult for our workers to enter and build a future for themselves and their families," reads the letter. "However, as a key contributor to the province's annual GDP (contributing $16.5 billion or 8.1 per cent) our industry is concerned that the tax and the way in which it was introduced two weeks ago will have unintended consequences that harm investor confidence and negatively impact both our industry and provincial economy over the long term."
They concluded by asking for an amendment to grandfather pre-sales prior to the rollout date and to engage with industry professionals on how to rollout the tax.
Famulak added in the long-term, the province's move could harm investor confidence.
"There was no engagement of our side of the industry. That may cause investors to question investing in Vancouver or B.C. for that matter," she said.
The legislation introduced an additional property transfer tax rate of 15 per cent for purchasers of residential real estate who are foreign nationals or foreign-controlled corporations.
The additional tax will apply to foreign entities registering their purchase of residential property in Metro Vancouver, excluding the treaty lands of the Tsawwassen First Nation.
For mixed-use property, the additional tax would apply on the residential component of the foreign interest in a property. For example, the additional tax on the purchase of a home valued at $2 million will amount to $300,000.
"These changes are about helping to make sure that British Columbians can continue to live, work and raise their families in our vibrant communities," Premier Christy Clark said in a statement.
The Greater Vancouver Home Builders' Association (GVHA) has also expressed concern over the tax. The association explained in new housing construction, pre-sale and custom build contracts are agreed often months or years in advance. These contracts are entered in good faith and on full disclosure of costs, fees and taxes.
According to the GVHA, the new tax will create an unfair and punitive burden to purchasers holding presale and custom-build contracts that now close.
Bob de Wit, CEO of the association, also explained the implications are more long-term.
"It's really about investor confidence in the businesses environment," he said. "We are really surprised a free enterprise government would bring in such a tax the way they have."
The government has explained that the tax is intended to curb the effects of excessive foreign investment on the local real estate market.