Typical price for Metro housing tops $1 million
With a review underway, industry sources say there hasn’t been ‘great change’ in the market
When the B.C. Liberal government slapped a 15 per cent tax on home purchases by foreigners in Metro Vancouver last year — the first such tax in Canada — it was meant to cool skyrocketing prices and improve housing affordability for local residents.
But a year later, the jury is still out on the tax, which is under review by the ministries of finance and housing under the new NDP government.
The tax has curbed the number of foreigners buying properties in Metro Vancouver. Ministry figures show a significant decline in foreign buyers since the tax took effect on Aug. 2, 2016, from 13 per cent in June 2016 to less than one per cent in August 2016. In recent months, the number has hovered in the three to four per cent range, although it is higher in Richmond and Burnaby.
But when it comes to the figure that matters — price — the tax seems to have fallen short.
After a small decline following the introduction of the tax, prices began to rebound in February and soon exceeded pre-tax levels. In July, the benchmark price of a residential property in the region surpassed $1 million, according to the Real Estate Board of Greater Vancouver.
“We don’t see a great change in the market specifically due to the foreign buyers tax,” said president Jill Oudil, adding July’s data is very similar to the 10-year average. “We have seen a very active market continue, especially where condos and townhouses are concerned.”
Listings are up about 10 per cent while sales are down eight per cent in July compared to the same month last year, but that’s not enough to exert any downward pressure on prices.
And as demand increases, supply has not kept pace.
“We know that charging taxes does not increase supply and low supply has been very relevant in what’s going on in our market,” said Oudil.
But Josh Gordon, assistant professor at Simon Fraser University’s School of Public Policy, says the continued rise in housing prices doesn’t indicate the tax is ineffective, but highlights its inadequacy in tackling a complex problem.
“Just because prices didn’t come down doesn’t mean it didn’t have an effect,” said Gordon. “Prices could be substantially higher if they didn’t introduce the tax.”
The foreign buyers tax wasn’t expected to achieve affordability on its own, even among its supporters, including him, said Gordon, who believes it is the influx of foreign money — not foreign buyers — that’s largely responsible for the disconnect between real estate prices and local incomes.
Gordon said the potential of the tax was dimmed in January after the government introduced its firsttime homebuyers loan program, a move he says “blatantly undermined the initial impact of the tax.” The loosening of the tax in March to exempt foreigners with work permits didn’t help.
“In housing markets like Vancouver, a lot rides on expectation and psychology of the market,” he said. “The other moves suggested in quite an obvious way that the government was going to prop up the market. It wasn’t going to allow prices to fall.”
The tax also doesn’t capture significant portions of foreign money pouring into the housing market, said Gordon, such as money brought in by wealthy immigrants or speculative schemes made by a local proxy that’s financed with foreign money.
He said the province needs to close loopholes, enforce regulations and implement a more comprehensive, long-term strategy, such as the NDP’s proposed two-per-cent speculation tax targeting people who buy property here, but do not pay income tax.