Do taxes on foreign purchases lower housing prices? Evidence from B.C. in Canada (Apr 2020)

• Do taxes on foreign purchasers lower housing prices? Evidence from the Additional Property Transfer Tax in British Columbia

• By Deaglan Jakob. Thesis submitted in partial fulfilment of the requirements for the Degree of Bachelor of Science, Honours, in the Department of Economics University of Victoria, April 2020

• Available as a PDF file on https://www.uvic.ca/socialsciences/economics/assets/docs/djakob_thesis1.pdf

• Abstract:

  • Housing affordability is an increasingly important public policy challenge not only in Canada, but also worldwide.

  • The B.C. [British Columbia] provincial government introduced the Additional Property Transfer Tax [APTT] in Metro Vancouver as a surprise legislation on August 2nd, 2016.

  • It imposed an additional 15% transfer tax on individuals or firms purchasing homes in Metro Vancouver who are not citizens or permanent residents of Canada.

  • In February 2018, the government extended the tax to several other regions in British Columbia, including Greater Victoria.

  • I exploit the heterogeneous regional implementation of the APTT to test its effectiveness in slowing the excessive growth in house prices in affected regions andincreasing housing affordability for local residents.

  • I find that the APTT reduces relative house price growth by approximately 1%. I also find that this effect is mostly front-loaded, with the decrease inrelative growth occurring immediately after the announcement of the tax and fading over a period of 7months.

• Keywords: Canada, British Columbia, property transfer tax, property market