Did the New Foreign Tax Make Vancouver Real Estate More Affordable?

Posted by Tony Cikes on Wednesday, February 8th, 2017 at 5:27pm.

Back on August 12, 2016 I wrote about the new 15% property tax that was introduced for residential property transfers to foreign entities (non-Canadian Citizen or non-Permanent Resident) in the Greater Vancouver Regional District.  I asked the question... "Will the new foreign tax make Vancouver real estate more affordable?".  It was too early to tell back then and now that 6 months have gone bye... did it? 

I have analyzed all of the listing and sold data. I separated houses from condo & townhomes and calculated their average prices. This is what has happened from August 2016 to January 2017:

In Metro Vancouver (Downtown Vancouver, Vancouver Westside, Vancouver Eastside, North Vancouver, West Vancouver, Richmond, Tsawwassen, and Ladner) listing inventory declined by 9.3% (4,207 in January compared to 4,597 in August) and we had 52.6% less properties sell (801 in January compared to 1,236 in August).

 

In regards to prices... Houses saw a reduction of 8.5% in their average price ($1,725,714 in January compared to $1,873,054 in August) while, condo & townhomes saw an increase of 12%! ($661,349 in January compared to $590,500 in August).

 

in Greater Vancouver, (Burnaby, New Westminster, Coquitlam, Port Coquitlam, Port Moody, Pitt Meadows, and Maple Ridge) listing inventory declined by 30.2% (1,813 in January compared to 2,361 in August) and we had 77.6% less properties sell (559 in January compared to 993 in August).

 

In regards to prices...Houses saw a reduction of 2.7% in their average prices ($1,012,802 in January compared to $1,040,143 in August) while, condo & townhomes saw an increase of 7.8%! ($423,464 in January compared to $392,643 in August).

 

In the Fraser Valley, (Surrey, South Surrey, White Rock, North Delta, Cloverdale, Langley, Abbotsford and Mission) listing inventory declined by 45.5% (2,882 in January compared to 4,194 in August) and we had 77.1% less properties sell (847 in January compared to 1,500 in August).

 

In regards to prices... Houses saw an increase of 0.2% in their average price($857,679 in January compared to $855,993 in August) while, condo & townhomes saw an increase of 1.1%! ($344,093 in January compared to $340,243 in August).

 

So did the 15% Foreign Buyers Tax make Vancouver real estate more affordable? Not really.

It can be argued that the foreign tax caused sales to decline and it caused the prices for houses to level and start declining (in some areas). The high end of the market has been the most effected while the entry level market is still going strong and seeing price appreciation.

Now we have to keep in mind that sales usually decline in the summer and winter as well as their being less inventory on the market during those times.  However, I was surprised to see that we had such a reduction in inventory which I believe is a cause of sellers taking their properties off the market if they do not need to sell.  

Now with the Spring market around the corner... will we see more supply?  Will there be an increase in demand? 

To help stimulate the market, the BC Government introduced two recent changes:

First... they introduced a 1st time home buyers mortgage and equity partnership where they will match a 1st time home Buyer's 5% deposit (up to a purchase price of $750,000) with a zero percent interest loan for 5 years .  It will be interesting to see how many 1st time home buyers take advantage of this offer from the BC Government

The second change was announced on Chinese New Years and following President Trump's announcement of immigration bans... (interesting timing?) The BC Government will not collect a 15% foreign Buyers tax if the Buyer has a work permit, is paying Canadian income tax and living in British Columbia.

The Government was smart to introduce these changes because they did effect the market with the 15% tax to foreigners.  It will be interesting to see what happens over the next few months.  Will these changes have an effect?  Will Donald Trump's policies influence our market?  Where will our supply and demand be? Will we have a Liberal or a new government?

Stay tuned as I keep you posted!


Tony Cikes
604.616.8669

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