B.C. city now ranks among world’s top 2 luxury home markets, and it’s not Vancouver

With Vancouver feeling the effects of a tax on foreign buyers, international investors are turning to pricey real estate in B.C.’s quaint provincial capital.

So much so, in fact, that the city now ranks among the world’s top two luxury property markets.

Click to play video: 'Realtor predicts impact of 15% foreign buyer tax on B.C. real estate'

5:04 Realtor predicts impact of 15% foreign buyer tax on B.C. real estate

Victoria ranked second on a list of the world’s hottest luxury markets for 2016 in a report released by Christie’s International Real Estate and Chestnut Park Real Estate of Toronto on Wednesday.

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The city’s ranking represented a climb from third place in the 2015 report; it didn’t rank among the hottest markets in 2014.

And it’s a ranking that came in a year that was its “best ever” for luxury home sales.

The legislature building in Victoria, B.C. Danita Delimont / Getty Images

One of the biggest reasons that Victoria showed up in second place was that international buyers are being “deterred by nearby Vancouver’s new 15 per cent tax on overseas capital.”

But Victoria was just one of a number of Pacific Rim markets that showed up high on the rankings.

“Relatively strong local economies alongside national and overseas migration and capital inflows were key contributors to growth in these ‘hot’ luxury property markets,” the report said.

Luxury home sales in Victoria are just one sign that the B.C. foreign buyers tax is having impacts beyond Vancouver, it added.

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Any shift in city-level policies “can have a ripple effect on the fortune and purchasing patterns of international buyers.”

And this is far from the first report to suggest an uptick in home sale activity (and prices) in Victoria following the tax’s introduction.

Earlier this year, BMO published a chart showing that prices dropped in Greater Vancouver but kept trending up in Victoria.

This chart shows that Vancouver home prices started dropping pretty clearly after July 2016, which was the last month before B.C. instituted a property transfer tax on foreign buyers. BMO

As it happens, Toronto reclaimed its spot atop the list of the world’s hottest luxury home markets after falling to second place in 2015 and topping the list in 2014.

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The rankings were determined by looking at factors such as the growth in sales for homes worth $1 million or more, as well as how many days such properties were spending on the market.

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Home price trends like this often give rise to concerns about whether a city is in a housing bubble.

Indeed, the Canada Mortgage and Housing Corporation (CMHC) recently said that Victoria is showing moderate signs of overheating; so is Toronto.

There are also plenty of questions about whether such price increases can be considered a good thing.

“Depends on if they own (and don’t care about their offspring’s ability to buy into their market too much, then it’s great news) or rent (then it’s not as great news),” UBC Prof. Tom Davidoff told Global News in an email.

Tweet This Click to share quote on Twitter: "Depends on if they own (and don't care about their offspring's ability to buy into their market too much, then it's great news) or rent (then it's not as great news)," UBC Prof. Tom Davidoff told Global News in an email.

But Toronto and Victoria weren’t the only cities that ranked among the world’s hottest luxury housing markets.