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Foreign buyer tax wreaks havoc on B.C. farmland sales

The 20 per cent levy has driven prices sky-high while stunting sales of existing farms where the owner lives on the property
freddy marks
Realtor Freddy Marks: foreign-buyer tax is negatively affecting “hard-working, tax-paying citizens of British Columbia.” | Submitted

In February the B.C. provincial government moved to ban the construction of so-called mega-mansions on provincial farmland, which critics say became a problem as a direct result of B.C.’s foreign buyer tax.

“This new law will encourage farming and better protect farmland by banning mega-mansions,” said Lana Popham, minister of agriculture, in a press release. “It’s a great step in our effort to revitalize the Agricultural Land Reserve so that British Columbians can count on a safe, secure supply of locally grown food on their tables for years to come.”

But real estate agents who specialize in farms and rural resorts claim the tax handicaps landowners who wish to sell their property because their residences are subject to the tax. They also say that the tax discourages foreign buyers who have been keen investors in rural B.C. properties.

The B.C. government introduced the foreign-homebuyer tax in 2016 and the current government raised the tax from 15 per cent of a home’s value to 20 per cent in its 2018 provincial budget. The move, targeting buyers of homes in Metro Vancouver, had negative and unintended consequences, according to Richmond FarmWatch.

The advocacy group claims a typical Richmond farmland was worth about $378,000 per acre in 2016 before the foreign-buyer tax came into effect, based on BC Assessment data. Now the same type of property sells for more than $1.1 million per acre. 

In one example, a newly built, farmland mega-mansion in Richmond, owned by a shell company, has driven the 26.6-acre lot it sits on from an assessed value of $88,000 to $8.3 million – equal to more than $312,000 per acre.

Farms have also apparently been erased since the foreign-buyer tax was introduced. Based on 2017 assessments, 56 properties that used to have farm designation switched to purely residential use. In comparison, only 22 farms gave up their farm designations over a five-year period between 2011 and 2016, Richmond FarmWatch said.

Meanwhile, on the Prairies, investors are kept at bay by legislation that restricts non-residents and even Canadian pension funds from owning farmland, and maximum per-acre prices are approximately $3,300 per acre in Manitoba and Saskatchewan and around $5,000 per acre in Alberta.

Real estate agent and farmland specialist Freddy Marks, however, said the tax on foreign buyers is negatively affecting “hard-working, tax-paying citizens of British Columbia” because it reduces the potential value of their rural property.

According to the B.C. Ministry of Finance, the foreign-buyer tax applies as follows:

  • Property classified as farmland by BC Assessment that includes a  residential improvement, such as a building used as a farmer’s home. You pay the additional tax on the value of the residential improvement plus 0.5 hectares (1.2 acres).
  • Property classified as commercial by BC Assessment that includes a residential improvement, such as a condo in a building with commercial space. You pay the additional tax on the value of the residential improvement.

“What the new tax has managed to accomplish is cause a rapidly escalating agricultural farmland crisis, and it has ruined many Interior and northern British Columbian’s exit strategy for retirement,” said Marks, of Agassiz-based Sutton Showplace Realty.

“Foreign investment has always played a key role in purchasing many of these profitable businesses. Many foreigners have now reconsidered their investment into B.C.,” Marks added in a statement sent to Western Investor.
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