Cool Down of Record Breaking Real Estate Market
One thing that the Vancouver Real Estate Market has failed to do this year is produce surprises. After what seemed to be a never-ending rise in the sales and listing of properties in theMetro Vancouver, the market has suddenly come to a screeching halt. With record-breaking figures reported in the market since the turn of the year, the sudden drop of house sales in July and August
has seen figures that are even less than what it was around the same time, last year.
The Real Estate Board of Greater Vancouver (REBGV) reported
that residential property sales in Metro Vancouver totaled 2,489 in August 2016, a decline of 26 percent compared to the 3,362 sales in August 2015; and 10.2 percent less than the 2,771 sales in August 2014. August 2016 sales also represent a 22.8 percent decline compared to the last month’s sales. There were only three home sales in West Vancouver between August 1st and 14th, compared to 52 during the same period, last year, which presented a decrease of 94 percent.
More Selling, Less Buying
What magnifies the low numbers of property sales in Metro Vancouver, even more, is the fact that property listings are also increasing. The number of unsold houses is beginning to pile up gradually, while there is a little progression in selling them.
New listings properties in Metro Vancouver totaled 4,293 in August 2016. This represents an increase of 0.3 percent compared to the 4,281 units listed in August 2015 and an 18.1 percent decrease compared to July 2016 when 5,241 properties were listed. The total number of properties currently listed for sale on the MLS® in Vancouver
is 8,506 - a 21.9 percent decline compared to August 2015 (10,897) and a 1.9 percent increase from July 2016 (8,351).
A reasonable conclusion for these statistics could be down to the fact that a majority of buyers in the Metro Vancouver real estate market were foreigners, who are suddenly backing away due to the Foreign Buyer Tax.
Supply V.S. Demand. There's increase in housing supply over the few months. Source: Rebgv.org
Foreign Buyer Tax
In recent years, foreign buyers have become particularly attracted to Metro Vancouver as an ideal city to purchase houses. But that allure is beginning to rapidly fade away as there seems to be a significant drop in their involvement.
This drop came when a 15 per cent foreign buyers’ tax was introduced in Metro Vancouver
in August 2016 to thwart off the foreign demand that has helped to fuel an unprecedented rise in home prices across the region. Vancouver was ranked as one of the least affordable cities to purchase a house
with a detached home costing at about $1.56 million.
Instead, this taxation has led to an increase in the demand for houses in the southern cities of Seattle and Toronto. Calgary and Ottawa have also seen a significant rise in their property sales.
Experts Predict Market Will Continue to Remain Healthy
Despite foreign buyers bailing on the Metro Vancouver market due to the new tax, a new forecast by Central 1 Credit Union
predicts B.C.'s hot real estate market will remain healthy for the next two years. Senior economist, Brian Yu believes that the levy on homes will slow down sales temporarily in Metro Vancouver by about 10 per cent.
The economist said slower growth is healthier for the market because sky-rocketing Greater Vancouver prices seen during what he described as "spring fever" were unsustainable, during the early part of 2016. He predicts prices in the region will rise by about four percent in both 2017 and 2018.
That is slightly lower than the B.C. Real Estate Association forecasts
of 5.8 per cent average growth in Greater Vancouver home prices for 2017. But, nonetheless, both agree to the fact that the Foreign Buyer Tax won’t completely drown out the Vancouver real estate market, but in fact, will benefit in the sustainability in the long run.
Only time will tell how positively or negatively the market will respond to the additional tax. At the moment, the tax was imposed to quell the immediate concern of extremely high property prices due to excessive foreign investment.
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