Metro Vancouver’s housing decline dragged statistics down for the whole province and consensus from the industry is the pullback in Canada’s most expensive city is far from over.
The British Columbia Real Estate Association said prices across the province dropped 8.1 per cent on average in August from a year ago, while sales rose 1.5 per cent during the period — despite a 25.6 per cent pullback in sales activity in Vancouver.
Cameron Muir, chief economist with the association that represents 20,000 realtors in B.C., said it’s too soon to say whether the new 15 per cent additional property transfer tax applied to foreign buyers in the metro Vancouver area would drive sales to other cities, like Abbotsford and Victoria, where the tax does not apply.
“I just haven’t seen any evidence,” Muir said. “It’s just too early to to tell the full ramifications of the tax at this point in time.”
The latest statistics come as the federal government has vowed to crack down on overseas buyers who may be using the principal residence exemption to avoid capital gains tax when speculating on property. The British Columbia land transfer tax, which went into affect Aug. 2 after being announced on July 25, includes provisions to prevent speculators from avoiding the fee, but some in the industry have wondered whether investors will be able to discover a loophole to avoid it too.
But, already the Greater Vancouver market appears to be showing strain. August results show the average price of a home in the area sold for $833,065, down 7.5 per cent from $900,592 a year earlier. The combination of lower prices and decreased sales erased almost $1 billion in dollar value from the market in August 2016 compared to a year earlier.
Muir said most of the rest of the province has “picked up the slack” for where Vancouver has dropped off, leading to an overall increase in sales.
“Through the entire southern half of the province, there is pretty broad-based consumer demand,” he said. “The fundamentals are strong. The economy is performing well, we’re tracking 3.5 per cent annual GDP growth, employment reports are still up year-to-date.”
Outside of Northern B.C., Greater Vancouver was the only place that saw price declines on a year-over-year basis in August. In Victoria, prices rose 4.6 per cent, while the Fraser Valley saw a 6.2 per cent jump and Kamloops was up 10.9 per cent.
“What we saw in Vancouver was an anomaly. We need another month to see what happens,” Muir said.
Others, however, think this might be the new reality for the Vancouver market. Stefane Marion, Montreal-based chief economist and strategist at National Bank of Canada, said Tuesday at the Bloomberg Canadian Fixed Income Conference in New York that prices could fall as much as 10 per cent.
What we saw in Vancouver was an anomaly. We need another month to see what happens
A new report on luxury homes from Sotheby’s International Realty Canada suggests the average price in Vancouver may be greatly influenced by a rapid decline in sales for houses priced at $1 million or above. The real estate company said sales in that category were down 30 per cent in July and 65 per cent in August from a year ago. In the luxury category of homes valued at $4 million and more, sales were down 33 per cent in July from a year ago and 46 per cent in August.
“We still see a (further) reduction in sales,” said Brad Henderson, chief executive of Sotheby’s Canada. “I think a lot of those higher end sales are on hold as people reflect on what this tax will mean.”
In the interim, the firm does believe that Chinese investors, who are thought to represent the bulk of overseas buyers in Vancouver, are now focusing their sights on other markets.
Henderson noted the Chinese international property portal juwai.com showed an 81 per cent drop in searches for Vancouver in August from a year ago and 143 per cent jump in Seattle. Toronto, Montreal and Calgary also reported an uptick.
“It’s going to take some time for hard and fast statistics to play out,” Henderson said.
Financial Post
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