Home tax threatens foreign tech talent in Vancouver

Bloomberg

Vancouver’s technology industry is in danger of becoming collateral damage in British Columbia’s push to rein in spiraling home prices.
The surprise decision last week to impose a 15 percent levy on overseas property investors may make it even harder for Vancouver to attract foreign talent and reach its goal of becoming a Canadian version of Silicon Valley. The city already has two major strikes against it: some of the highest housing costs and lowest wages among North America’s emerging technology hubs.
“It’s a complete shock, a nightmare,” Eric Kong, a Singaporean computer scientist who’s in the middle of relocating his family to Vancouver, said in a telephone interview. “If I’d known this, we would’ve gone somewhere else.” With education that also includes a masters degree in finance, Kong is exactly the kind of expatriate the city is trying to attract. However the new tax, which took effect
this week, is putting his plans into a tailspin. He said he needs to come
up with an extra C$114,000 ($87,000) to finalize a deal for a C$775,000 home. Canceling the move means he’d forfeit the C$80,000 deposit and prepaid tuition for his two daughters. He’d also have to scramble to find a new home in Singapore, where the family gave up its lease, sold their car, and packed boxes which are about to be shipped.

PUT OUT
Kong isn’t the only foreign buyer put out by the new measures. The regional land title office extended its hours through a holiday weekend to deal with the crush of deals being rushed through before the Tuesday deadline. It also began accepting faxed applications on Monday until 11 p.m. after the online system faced technical glitches, according to an advisory sent out to users.
Buyers who aren’t Canadian citizens or permanent residents will pay an additional 15 percent transfer tax on purchases of residential homes in Vancouver starting August 2, according to measures outlined by the British Columbia government on July 25. “This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs,” said Finance Minister Michael de Jong.
The city, which needs higher incomes to match its cost of living, is seeking to remodel itself from a 19th century mining and lumber town into a high-tech mecca for animation design, startups and financial services. It’s home to Hootsuite Media Inc., one of Canada’s few private tech companies to reach a $1 billion valuation, and the city’s tech scene generated C$23 billion in revenue in 2014, according to data from the Vancouver Economic Commission.

FAILURE TO ATTRACT
Yet it struggles to attract high-end talent and corporate head offices, or to build the transportation infrastructure to support income and productivity gains. “It is good that the British Columbia government is taking action against the inflation of real estate prices, but it might have negative effects on U.S. tech talent,” said Boris Wertz, a venture capitalist who invests in tech startups in Vancouver.
Tech jobs in British Columbia pay on average 43 percent less than those in California, according to a June 2015 report by the provincial statistics agency. Add in the high cost of living and the city can be a hard sell. Hootsuite took months to find a chief financial officer last year, eventually hiring one from Canadian software giant Open Text Corp.
Kong, who decided to move to Vancouver before securing a job, had plenty of options. With his programming and financial-modeling skills he was confident of finding work or growing a business almost anywhere. But the family was smitten by Canada’s landscape and people during a vacation a year ago.