Early data from the Real Estate Board of Greater Vancouver suggest the 15 percent foreign buyer’s tax may be curbing sales and limiting price gains, adding to a slowdown that started in May amid concern a housing bubble was forming in Canada’s third-biggest city.
British Columbia’s measures to cool off North America’s hottest real estate market are starting to have the desired effect.
Early data from the Real Estate Board of Greater Vancouver suggest the 15 percent foreign buyer’s tax, which was unveiled July 25 and took effect Aug. 2, may be curbing sales and limiting price gains, adding to a slowdown that started in May amid concern a housing bubble was forming in Canada’s third-biggest city.
Home sales in the Pacific Coast city fell 51 percent to 758 transactions in the first two weeks of August from the same period a year earlier, with detached properties bearing the brunt of the pain, with a 66 percent drop in deals. The data is preliminary and may change by the end of the month, according to the board. In the final week of July, after the tax was announced, there were only 572 sales, a 35 percent slide from a year earlier, the board said.
“Our concern with this tax is that the market’s already tailed off starting in the spring,” said Barry Allen, chief executive officer of Zolo, a brokerage that compiles multiple-listing data and makes it publicly available. “Housing was getting too expensive for people to sell, not to buy. Because they’re saying ‘I’ll only sell if I know where I’m going’ and they couldn’t afford what was out there.”
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National Bank Financial, which analyzed the real estate board’s data, says the detached-home market started to cool after May, which saw a record 4,769 sales for that month. Transactions in the 12 months to July fell 4.5 percent to 17,913 deals, compared with the 12 months to May.
At the same time listings, which had been rising steadily since January, hit 26,048 in the 12 months to July, the highest in at least three years. As supply overtook demand, the price growth of the average detached home also slowed, slipping 3.4 percent from January to July to C$1.76 million (US$1.36 million), the real estate board said.
“Neighborhoods with more expensive homes suffered more significant declines in purchase activity,” Peter Routledge, an analyst at National Bank in Toronto, said in an Aug. 7 note to clients. “Even prior to the foreign-buyer tax change, we found early evidence of cooling demand” in areas preferred by foreign buyers. “Weakening demand has translated into weakening home valuations across Vancouver.”
When announcing the foreign tax, British Columbia Finance Minister Michael de Jong also said he would allow Vancouver’s municipal government to tax empty homes, some of which may have been bought by foreigners as investments.
Officials from the federal, provincial and municipal governments are taking part in a housing roundtable, established in June, to address concerns about the elevated Toronto and Vancouver housing markets and provide policy suggestions. Prime Minister Justin Trudeau has met with local experts and market players including developers, credit unions and nonprofit housing groups in Vancouver.