Vancouver real estate‘s stratospheric price climb appears to have stalled, according to the most recent data. August numbers released by the Real Estate Board of Greater Vancouver (REBGV) show sales have seen a dramatic 26% dip over the past month in the wake of a newly-implemented foreign investment tax designed to cool the market.
Year-over-year residential sales are down to 2,489 units sold from 3,362 – 3.5% below the 10-year average.
“The record-breaking sales we saw earlier this year were replaced by more historically normal activity throughout July and August,” stated Dan Morrison, REBGV president, in a release. “Sales have been trending downward in Metro Vancouver for a few months. The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers.”
Will Vancouver Real Estate Become Affordable?
So has the foreign investment tax effectively fulfilled its promise of calming Vancouver’s out-of-control market? Not so fast – while sales have indeed slowed down, REBGV finds the majority are occurring in the luxury segment.
Generally, affordability hasn’t improved; the average price for detached homes rose 4.2% to $1,577,300 – 60% higher than in Toronto’s market. The overall average residential home price is up 31.4% year over year to $933,100, according to MLS Home Price Index Composite – hardly a deal.
REBGV also finds Vancouver is still very much a sellers’ market, with an August sales-to-active-listings ratio of 29.3%. To put that in perspective, home prices tend to dip lower when that ratio falls below 12%, and are pushed higher when it sits above 20%.
Bidding Wars Still Abound
Aman Brah, an agent with Port Coquitlam-based Keller Williams Elite Realty, told Zoocasa bidding wars are still alive and well in Vancouver despite a drop in luxury home demand.
“We’re not seeing those move as fast because people are thinking twice and seeing how things play out over the next little while,” he says. “Higher-end properties are sitting on the market a little bit longer now, but we had a property that was $550,000 and we had nine offers on it. Properties that are priced right are still getting multiples, a crazy amount of crowds and attention.”
Non-Detached Home Markets Still Hot
Morrison adds the higher-end sales slowdown is effectively skewing the numbers for the rest of Vancouver’s market, which remains ensnared in steep lack of supply and has seen prices shoot through the roof over the past year.
“In aggregate, we continue to see an imbalance between supply and demand in most communities,” he stated. “However, we’re also seeing fewer detached sales in the highest price points and fewer detached home sales relative to all residential sales. This is causing average sale prices to show a decline in recent months, while benchmark home prices remain virtually unchanged from July.”
Sales of apartments and condos saw a more modest 10.1% decrease year over year to 1,343 units sold, with prices up 26.9% to an average of $514,300. Attached property sales have also dropped 25.4% year over year, but have experienced 31.1% price growth over the past year to an average of $677,600.
Taking a Wait-and-See Approach
While both REBGV and analysts have hinted that Vancouver’s market was already on a slowing trend, it’s clear that the new tax, which requires foreign buyers to pay an additional 15% on home purchases in Metro Vancouver, has spooked buyers in the short term.
Morrison says additional data is needed before drawing a concrete conclusion on the tax’s effectiveness. “It’ll take some months before we can really understand the impact of the new tax,” he stated. “We’ll be interested to see the government’s next round of foreign buyer data.”
Do you think Vancouver real estate will become more affordable? Tell us your thoughts in the comments.
