New B.C. tax on foreign home buyers cools market

British Columbia’s measures to cool off North America’s hottest real estate market are starting to take effect.

Early data from the Real Estate Board of Greater Vancouver suggest the 15-per-cent foreign buyers 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 Vancouver fell 51 per cent to 758 transactions in the first two weeks of August from the same period a year earlier, with detached properties falling 66 per cent.

The preliminary data may change by the month’s end, according to the board. In July’s final week, after the tax was announced, there were only 572 sales, a 35-per-cent 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, CEO of Zolo, a brokerage that compiles multiple-listing data.

“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.”

National Bank Financial says the detached-home market started to cool after May, which saw a record 4,769 sales. Transactions in the 12 months to July fell 4.5 per cent from May to 17,913 deals.

At the same time, listings, 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 per cent from January to July to $1.76 million, the Vancouver real estate board said.

Vancouver prices will rise 14 per cent this year from 2015 to an average $1.03 million. Price gains will slow to 5.8 per cent next year, according to the agency group that represents 20,000 realtors in the province.