Photo: Kyle Pearce/Flickr
It’s been one year since Metro Vancouver’s foreign-buyer tax was implemented to calm what was once the nation’s hottest markets. But has the contentious tax had the desired impact?
“Whatever the tax did, the effect I would say would be very small if any,” Jill Oudil, president of the Real Estate Board of Greater Vancouver (REBGV), tells BuzzBuzzNews.
Last year, Metro Vancouver residents were grappling with sky-high real estate activity in the scorching market.
In June 2016, sales were 28 per cent above the 10-year average for the month — the highest level observed in June on record, according to REBGV.
The next month saw residential property prices soar a record 32.6 per cent year-over-year to a benchmark price of $930,400.
To address the market’s elevated activity and combat the region’s worsening affordability issues, the then-Liberal government implemented a 15 per cent tax foreign-buyer tax for Metro Vancouver, on August 2nd, 2016.
The levy’s impact quickly materialized as sales and prices started to dip.
“It helped bring demand back down to more historically normal levels,” TD Economics’ Diana Petramala tells BuzzBuzzNews.
However, some have argued that a drop in sales was evident before the tax was introduced.
According to RBC, sales started to edge downwards in March 2016, following the BC government’s announcements of a variety of measures to ease Metro Vancouver’s market. Initiatives included amending property transfer tax legislation and an attempt to end shadow flipping.
The bank also notes the tax likely had a moderating effect on prices.
“Its announcement in July coincided with the cyclical peak for price increases in the area, and its implementation in August coincided with the first weakening in annual price growth in more than three years,” writes Robert Hogue, Senior Economist for RBC, in a note.
The tax did have an immediate and pronounced impact on foreign buyer activity in the market.
Before the tax was implemented, foreign buyers were involved in 13.2 per cent of Metro Vancouver’s residential transactions from June 10th to August 1st, according to BC government data.
That number dipped dramatically from August 2nd to the 31st, with foreign buyers only accounting for 0.9 per cent of residential real estate transactions in the region.
Even though activity started to ease in the region, TD’s Petramala notes that the tax wasn’t entirely responsible.
“Whatever recovery we did see in Vancouver in sales was more because I think interest rates had fallen as well. Mortgage rates had risen between November and March by 30 basis points and then they came back down between March and April, which helps support the recovery in Vancouver,” says Petramala.
The slowdown was indeed short-lived as activity started to rebound in early 2017.
“I think as the market digested it, a couple months later for the condo market, things were back to normal, and then I would say the detached market is still off its peaks,” says Vancouver realtor Steve Saretsky.
Fast forward a year later, in July 2017, the benchmark price of a residential property in the region cracked the one-million dollar mark at $1,019,400 — an 8.7 per cent increase from July 2016, according to the REBGV.
Meantime, overall residential home sales were down 8.2 per cent year-over-year last month, with a total of 3,226 transactions.
With poor affordability still a major concern, the province’s newly-formed government is planning to review Metro Vancouver’s foreign-buyer tax, Selina Robinson, BC’s Housing Minister, told the Canadian Press on Monday.
“I don’t know that we have any plans to eliminate it. There’s certainly enough data that would help us to understand its value, and so, we have to look at that data,” says Robinson.
As for if the foreign-buyer tax will have any hold going forward, Petramala says based on other jurisdictions that implemented a foreign-buyer tax, including some markets in Australia as well as Singapore and Hong Kong, it might just be a band-aid solution.
“These measures tend to be temporary. They only last about four quarters or up to four quarters. Then you tend to see a bounce back in activity,” says Petramala.