VANCOUVER – Home sales in the Vancouver area tumbled 26 per cent in August compared to the same month last year, as observers say a new tax on foreign buyers accelerated a cooling trend in the market.
The Real Estate Board of Greater Vancouver released the data a month after the British Columbia government implemented a 15-per-cent tax on foreign buyers in Metro Vancouver in an effort to chill one of the hottest markets in North America.
Dan Morrison, president of the real estate board, said sales have been slowing down for several months. While the tax has added to the downturn, it’s hard to say how much, he said.
“There’s no question the foreign-buyers’ tax is having an effect, and that effect is causing everybody to hold their breath and say, ‘What’s going to happen?’ ” he said Friday.
“Certainly the first two weeks of (last) month, we saw a lot of that. However, as the month progressed, we saw it returning more to normal, whatever normal is in Vancouver.”
Morrison said the month ended about three-per-cent below the 10-year average for sales in August, signalling a return to historically normal activity after record-breaking sales earlier this year.
It will be months before the true impact of the tax is understood, he added.
While sales were down, the board also reported that the composite benchmark price for all residential properties was $933,100, a 31.4-per-cent jump compared to August 2015.
Tsur Somerville, an associate professor at the University of British Columbia’s Sauder School of Business, said he didn’t think prices would decline but the rate of increases would slow down.
He said it’s hard to quantify the effect of the foreign-buyers’ tax without new data from the B.C. government, but he pointed out sales of detached homes dropped 45 per cent last month.
The detached housing market has been completely out of sync with incomes and that sector was thought to be most favoured by wealthy non-local buyers, Somerville said.
“That’s the area that would be most sensitive in a correction and the area that would be most sensitive to the tax.”
The B.C. Finance Ministry said it expects to release in mid-September the amount of revenue earned from the tax, as well as the number of foreign transactions during the second half of July and August.
Advanced Education Minister Andrew Wilkinson, speaking because the finance minister was unavailable, reiterated the real estate board’s view that August’s sales reflect a return to normal volumes after an overheated period.
“It’s early to tell what the effect of the tax was, but certainly the market is calming down, which is in keeping with what the goal of the tax was.”
New listings in the Vancouver area totalled 4,293 in August, a slight increase from the 4,281 units listed for the same month in 2015. But new listings were down 18.1 per cent from July.
The total number of properties listed in August was 8,506, down 21.9 per cent from a year earlier and up by 1.9 per cent from July.
The real estate board said it is still a seller’s market based on the data released Friday.
Royal LePage Realtor Adil Dinani said the impact of the tax is evident in the data, but sales are still relatively strong and underpinned by a booming condo and townhouse market.
Dinani said he was seeing price reductions in detached housing. Investors and speculators are now sitting out of the market, waiting to see the impact of the tax and the ongoing cool-down, he said.
“When the prices are going up, it’s easy to jump into the market,” he said. “Now, no one really knows what that segment of the market is doing. There’s no rush to jump in, because prices may in fact retract.”
He said the decline in listings is not a problem because homes are not selling overnight or over a weekend any more. Supply is still down year-over-year, but current conditions allow buyers to take time with decisions and negotiate good terms, he said.
Marc Pinsonneault, a National Bank of Canada senior economist, said in a note to customers that it was difficult to conclude the tax had an obvious impact on August sales.
The decrease could be a continuation of the deceleration that was already underway — probably due to higher down payments and fast-rising prices harming affordability — and perhaps the Chinese authorities’ crackdown on foreign capital outflows, he wrote.
“It’s not to say that there’s no evidence of an impact of the tax,” he said in an interview. “But it hasn’t translated in the kind of collapse that people were describing earlier in the month.”
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Note to readers: This is a corrected story. A previous version said the city implemented the tax.