Vancouver housing market rebounding after tax on foreign buyers, BCREA says
The association that represents British Columbia realtors now says the impact of an Aug. 1, 2016, decision to add an additional 15 per cent tax on foreign buyers in Metro Vancouver was more severe than previously estimated.
But the British Columbia Real Estate Association, which represents 20,000 realtors in the province, says the Vancouver market is recovering from the tax with even high-end homes returning to their pre-tax share of sales.
“Sales of homes priced over $3 million ramped up in the first half of 2016, reaching five per cent of total Metro Vancouver sales in February. By August, when the tax was implemented, that share had already fallen to 3.6 per cent and continued to decline with the introduction of the foreign buyer tax,” the report released Monday states. After dipping as low as one per cent of all sales, that share is up to about three per cent.
A higher percentage of sales in the high-end of the market can have a dramatic impact on average prices. The provincial group now expects average prices in Greater Vancouver to drop 3.6 per cent to $980,790 in 2017 and rise 4.2 per cent to $1,022,000 in 2018.
For the entire province, prices are expected to fall 1.1 per cent in 2017 to $683,500, and then rise 5.2 per cent in 2018 to $719,100.
“The province is in its fourth year of above-trend economic growth,” said Cameron Muir, chief economist with BCREA. “Strong employment growth, consumer confidence and an influx of interprovincial migrants are important drivers of the housing market this year.”
The board said millennials entering their household forming years are putting pressure on supply in the condo sector.
“The decline in the provincial average price is largely due to rising demand for more affordable condominiums and a larger proportion of home sales occurring outside the Metro Vancouver region,” the group said in a release.
Data last year may have missed the mark on the foreign tax’s impact because so many sales were pushed forward to avoid the tax. The tax was announced on July 25 but not implemented for a week.
“It turned out that the impact of the tax was much more immediate than in our simulation. Total Real Estate Board of Greater Vancouver sales fell 19 per cent in August 2016 compared to our projection of just eight per cent,” the BCREA said in its report.
“Since then, sales have evolved broadly as expected. Other than a weather-induced blip in January, home sales have been on an upswing and are where we would have expected them to have been at this point, without the tax.”
The B.C. data is being followed closely in Ontario, which instituted a 15 per cent non-resident speculation tax on April 20 for homes in Greater Golden Horseshoe and since then has seen sales drop 20.3 in May from a year ago in Greater Toronto while average prices fell 6.2 per cent in one month.
The B.C. experience seems to indicate foreign buyers are limiting how far they will go beyond a metro area.