REAL ESTATE TAKES A DIVE

I t may be coincidental that sales of detached homes in Metro Vancouver dropped by as much as 86 per cent from Aug. 1 to Aug. 15 at the same time as the foreign buyers tax came into effect. After all, how many times have we heard that correlation does not imply causation?

The B.C. government says it is too soon to conclude how the real estate market has responded to the 15-per-cent tax introduced Aug. 2. Some analysts say the market peaked in February and has been self-correcting, down 30 per cent in most areas since May, as reported by Business In Vancouver, and heading for a soft landing.

So, there must be other explanations for the market suddenly falling off a cliff. Perhaps all homebuyers took the first two weeks of August off for vacation. Or perhaps the foreign buyers said to be driving the market all ran out of money at the same time. Or maybe market demand was sated on July 31 and everyone who wanted to buy a house had one. Or could it be that word of mouth got out that Vancouver isn’t so great?

Given that areas not subject to the tax did not experience the same dramatic declines — detached home sales in Squamish this month, for example, matched the number last year — we’re speculating that the new tax had something to do with it. And let’s go out on a limb here, some price erosion is likely to follow. Indeed, there is some evidence that benchmark prices are either falling or stagnant after a rapid run-up in previous months.

As Postmedia reporter Sam Cooper wrote on Friday, a house on West 15th Avenue listed at $4 million sold this month for $3.8 million. Last August, a similar house nearby listed at $4 million and sold for $5.86 million.

Zolo Realty BC Inc., cited in the Business In Vancouver report, says that as of Aug. 22 the average home price in Vancouver dropped 17.1 per cent from July 25 to $1.1 million.

With sales of detached homes in West Vancouver dropping from 59 during the first half of August last year to just nine this year, and on the West Side 72 to 15, and in Richmond 89 to 12, the concerns of the real estate industry are understandable.

But the public wanted the government to cool the market. It appears the Christy Clark government put it into the deep freeze.