As the dust settles following the implementation of a 15% tax on foreign buyers of Vancouver real estate, it is becoming more evident how much of a role these buyers play in the west coast city’s sky-high housing prices.
According to the October housing report from the Real Estate Board of Greater Vancouver, sales have dipped below the historical average since the tax, plunging 38.8% in October year over year, with only 2,233 properties sold, compared to 3,646 the same time in 2015.
Waiting Out the Impact of New Market Rules
REBGV President Dan Morrison says it’s a sign buyers are waiting to see how the changes, which were introduced in August, play out across the market before making their move.
“Potential buyers are taking a wait-and-see approach to try and better understand what these changes mean for them,” he stated in a release. He adds that the luxury and detached market has been most impacted, indicative that wealthy foreign investors are taking pause. “While sales are down across different property types, it’s the detached market that has seen the largest reduction in homebuyer demand in recent months,” he says. Only 652 detached houses were sold in October, a 54.6% drop from 2015.
And, while the average home sale price in Vancouver is still well above the national average at $919,300 (up 24.8% year over year), it has dropped a slight 0.8% from September. REBGV points out Vancouver is still deep within sellers’ market territory; sales-to-active listings ratios above 12% put pressure on rising prices. The city’s current ratio is 24.4%.
Foreign Buyers Have Made Their Mark in BC
Findings from Re/Max also support the theory that foreign investors were making a significant dent in the luxury market. “Vancouver’s high-end market has experienced a slowdown in the past several months,” says Elton Ash, regional executive vice-president of Re/Max of Western Canada. “Part of this may be due to the tax on foreign buyers that was introduced in August, though there may be other factors at play as well, such as higher inventory lessening buyers’ sense of urgency.
Toronto Market Fueled by a Different Fire
Meanwhile, in Toronto, sales for all home types are booming, up 11.5% to a record 9,768 units, reports the Toronto Real Estate Board’s October Monthly Resale Housing Market Figures, and the average price a whopping 21.1% to $762,975. TREB reports that while all housing types saw double-digit increases, detached house sales are up 10% from last year, with most of the action happening in the suburbs.
However, Toronto housing experts don’t believe foreign buyers are pushing this increase. On the contrary, market analysts are saying the market’s biggest speculative boost is coming from home-grown sources. In a survey conducted by Ben Myers of research firm Fortress Real Developments, and reported on by the CBC, domestic real estate investors now account for 25% of local real estate agents’ client bases.
Stated Myers to the CBC, “I was actually surprised it was that high. It’s a large percentage of the market and much more concerning than foreign buyers.”
This is supported by a recent report from real estate think tank Urbanation, which found there are 10 times more domestic investors in Toronto than foreign buyers.
And, while there had been initial speculation that Ontario may introduce a similar tax to Vancouver’s, Premier Kathleen Wynne has quashed it, stating she would not introduce a tactic designed for a “completely different” market without understanding its consequences.
Wynne had also stated that while there are some housing market changes to come for Ontario, they would be focused on improving housing affordability, and helping first time buyers break into the market. It remains to be seen whether domestic investors will be among the issues targeted by the provincial government’s efforts.
Do you think domestic investment is negatively affecting Toronto housing prices? Tell us your thoughts in the comments!