Home sales in Greater Vancouver plunged 26 per cent in August compared to the same time last year, but experts say it’s too early to tell if the new provincial tax on foreign home buyers is cooling the red-hot real estate market.
The Real Estate Board of Greater Vancouver said Friday that residential property sales fell to 2,489 in August 2016 from 3,362 sales in August 2015. The latest data also showed August 2016 sales were down 22.8 per cent from July 2016.
Dan Morrison, president of the real estate board, said the new numbers show that record-breaking sales seen earlier this year have been replaced by “more historically normal activity” in July and August.
“Sales have been trending downward in Metro Vancouver for a few months,” Morrison said in a statement. “The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers.
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Josh Gordon, an assistant professor at Simon Fraser University’s School of Public Policy, also urged caution when linking the decline in home sales to the 15 per cent tax for foreign buyers that was announced in July by the B.C. government.
“We want to see another month or two of data on this before we make any conclusions, but there are definite signs that the market is cooling,” he said. “It does seem the tax has reduced activity, but the question will be if that number holds in September.”
Gordon said part of the decline in sales could be attributed to the uncertainty the tax generated in the housing market.
“As certainty returns you might see home sales pick back up again,” he said.
While sales were down, the real estate board also reported that the composite benchmark price for all residential properties in Metro Vancouver was $933,100, a 31.4 per cent jump compared to August 2015. Prices also rose 4.9 per cent over the last three months.
There were 715 sales of detached homes in the region in August, a drop of 44.6 per cent from the same month in 2015. The average price of detached properties sold last month in Metro Vancouver was $1.47-million, down 16.7 per cent from July.
William Strange, a professor at the University of Toronto’s Rotman School of Management, said housing markets are driven by a number of factors and it can be a mistake to single out any one influence.
“There does seem to be some evidence the tax is having an impact on demand,” Strange said. “But it’s not possible to estimate the effect of one change on demand one month after it’s implemented.”
RBC senior economist Robert Hogue said the market had already begun to cool before Friday’s numbers were announced, and had been falling from an all-time high in February for a number of reasons, including a lack of affordable homes that was hurting demand.
“Previously, the provincial government wanted to let the market work things out on its own, but then over the past few months — and particularly with that 15 per cent tax — it sent a signal that it might become more interventionist,” he told the Canadian Press.
Hogue also doubted the new tax would permanently drive away Chinese buyers.
“I would not think that this is the end of that decades-long love affair. It might be a bit of a temporary break,” he said.
*With files from the Canadian Press