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
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