Foreign investment tax in B.C. causes a big drop in sales

On the heels of the introduction of a 15% tax on foreign investment that went into effect July 25th in the Vancouver market, home sales have taken a major dip.

August isn’t typically a hot month for real estate, but the first two weeks of the month saw a mere three sales in the West Vancouver area, a decrease of 94% from last year’s 52 sales, according to Vancouver realtor Brent Eilers and his scrutiny of MLS listings, via Global News.

Although the tax can probably shoulder some of the blame, July was not a good month for sales in the city either, down from 80 sales in West Vancouver last year to 44 this year; June in the same area was down from 102 to 74.

While the Real Estate Board of Greater Vancouver (REBGV) price index matrix failed to show much change in prices for the first two weeks of Vancouver, real estate brokerage Zolo, which tracks MLS home sales and reports average prices, says City of Vancouver prices dipped 24.5% in the last three months.

Global’s own analysis of the Vancouver MLS revealed an 85% drop in sales in the first two weeks of August, with a 96% drop in Richmond. Zolo CEO Barry Allen said the Richmond market in particular had gone “off a cliff,” according to Global, with average prices down 20.7% from three months ago.

Vancouver

It doesn’t necessarily reflect a falling off of the entire market, since average prices can reflect a steep decline in predominantly high-end homes (which would be more affected by the tax), but it may be reason for caution, since big price corrections can take time to hit the general market.

It remains to be seen if what is starting to look inevitable in Vancouver will hit Toronto (in fact, we may see high-end housing prices spike here, as foreign buyers look for another safe market in which to park their money), but remember that even the sharpest price corrections recover, and fairly quickly.

It took only about six years for the major price crash we saw back in 1980 to get back on track. The worst thing that can happen to any market isn’t actual price changes — it’s changes in attitude that lead to anxiety and panic.

The best thing you can do remains to buy a home you can afford in the long run, regardless of what happens with interest rates or prices, and don’t do anything rash. It’s never a good idea to solve a temporary problem with a permanent solution.

You don’t need to rush into the real estate market or homeownership. If it makes sense for you and your family to buy, then buy. If not, wait until you find the right home or property.