The British Columbia government announced new rules aimed at ending the practice of shadow flipping, which is believed to be one of the factors fueling Metro Vancouver’s red hot real estate market.
Finance Minister Mike de Jong says new rules starting May 16 will require property offers to include two separate terms dealing with contract assignments in pending deals.
He says the rules require real estate agents to include the consent of the seller to transfer the contract to another buyer and spells out that profits from the contract change must go back to the original seller.
De Jong says the changes are designed to prevent situations where a buyer profits by selling a home at a higher price before the closing date of the original sale.
What you need to know about ‘shadow flipping’ in Vancouver
Premier Christy Clark has said “pure, naked greed” is driving real estate agents to flip a property multiple times at higher prices before a deal closes, allowing agents to continue making commissions while buyers avoid paying the property purchase tax.
Thomas Davidoff of UBC’s Sauder School of Business says the government is treating the symptom instead of looking for a cure.
“The government by addressing shadow flipping is addressing one not very important symptom of the larger issue of very high and very volatile housing prices,” he said. “It’s a hard problem to treat and I believe the government’s energy…would be better spent handling the important issues of taxing and zoning that can actually move the dial.
“Shadow flipping is a convenient scapegoat in that nobody likes it…It’s not the cause of high housing prices, it’s an outcome of high housing prices. By addressing it you seem to be touching something that really strikes a nerve with people.”
De Jong says the government is also amending property transfer tax forms to collect data about the country of origin of people buying real estate in B.C.
– With files from John Hua and The Canadian Press
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