The Trump International Hotel and Tower in Vancouver set a record price when it was sold out, however, it now looks like the 15 per cent foreign buyer tax being implemented is making presale buyers uncomfortable.
Holborn Group CEO and Developer Joo Kim Tiahsaid the tax has affected offshore presale buyers who have now decided they don’t want to close the deal in the wake of the 15 per cent tax levy. The group said it had sold all the luxury condos in the tower at an average $1,615 per square foot, which sets a new record for a condo in Canada.
Luxury penthouses in the tower are expected to priced starting are $20 million when they are available next year.
The developers have admitted that a small percentage of buyers are now saying they can’t close the deal and that they are helping them get financing to help finalise the sale.
Another trend some foreign buyers are practising is to assign their properties to a Canadian relative, and this is becoming an industry practice to close the deals at a price initially agreed upon, some experts say. Assigning to relatives is a common phenomenon in presales; however, it can only be awarded at the agreed-upon price, so buyers don’t flip the property.
Buyers who had foreign passports purchased about 10 per cent of the units at Trump Tower, Developer Joo Kim Tiahsaid said.
The new tax applies to purchases that were in the process; this was something experts seem to agree was uncalled for as the stability of deals made was hurt by it. Buyers who entered into contracts a couple of years ago now have to pay 15 per cent more.
The property transfer gets paid when a buyer registers ownership with the land titles office since presales are made years in advance it doesn’t get paid until residents take occupancy. This is especially bad for developers whose buildings are nearing completion as presale buyers could rather lose their deposit than raise an additional 15 per cent to close the deal.
This new tax has also changed developers minds on assignments, developers who were not entirely happy about assignments earlier now realise it is their interest.
Assignments don’t work unless it is with a trusted relative or close friend; the buyer is selling their rights to the property. It may be transferred back later, but since the revenue agency covers all transactions, it can be challenging to make large payments to your relative without dealing with issues.
Some experts feel that the time is right for Canadian buyers to close deals as some foreign buyers are not eager to buy. While the volume of real estate sales is expected to decrease in the next few months, most experts agree that the tax is not going to have a lasting impact on the real estate economy. The 15 per cent foreign buyer tax is not the first issue the tower is facing it has previously been in the news for new ownership and lawsuits by investors.