According to statistics from the Real Estate Board of Greater Vancouver—highlighted in a recent Globe and Mail article—year-over-year detached home sales in the Vancouver region have been declining at a quicker pace since the government implemented a new tax 15 per cent tax for foreign buyers.
RE/MAX polled its Lower Mainland brokers in early August with the goal of finding out the early impact the new tax was having on their Sales Associates’ deals.
RE/MAX offices within Vancouver reported approximately five per cent of deals being affected by the foreign buyer tax, while outlying Lower Mainland offices were seeing closer to two per cent of deals affected.
“It’s a domino effect,” said Elton Ash, Regional Executive Vice President of RE/MAX of Western Canada. “Foreign buyers aren’t the only people being hit. Canadians who had contracts to sell and had already put offers on their next house are impacted as well. So although five per cent of deals may be affected, the domino effect could potentially grow that number much higher.”
Ash added that the majority of home sales affected appear to be the $500,000 to $750,000 condos. The foreign buyers who typically purchase that type of housing are middle-class recent immigrants working in Vancouver, he noted.
“They’re the people who can least afford the tax and will likely be forced in a default situation because the banks won’t lend on tax,” said Ash. “At the very least, the government should have grandfathered the existing deals.”
It’s difficult to determine exactly how much of Vancouver’s slowing housing market can be directly attributed to the foreign buyer tax; however, the market seemed to be correcting since June. Ash said the provincial government’s decision to intervene in the market could significantly accelerate the slide in home sales.
“These are uncharted waters; anything could happen.”