Photo: Sara Long/Flickr
It’s been three days since a 15 per cent tax came into effect for foreigners purchasing residential properties in Metro Vancouver, and reactions from those affected have been decidedly mixed. While some have hailed the tax as a long-overdue solution to soaring home prices in the region, others believe it will only introduce new issues.
Vancouver realtor Steve Saretsky believes the tax could prove problematic. As he explains in an August 2nd blog post, the week leading up to the tax’s start date was “a painfully slow week for the real estate market” — just 17 detached homes were sold across Richmond, Burnaby, Vancouver West and Vancouver East, down from 60 the week before and 113 the week before that.
The story was similar for attached homes, with 126 being sold the week before the tax was introduced. That’s down from 272 two weeks prior and 306 three weeks prior.
Those declines certainly look dire, especially when taken in conjunction with new Metro Vancouver home sales data released this week by the Real Estate Board of Greater Vancouver (REBGV). It shows that just 3,226 homes were sold in the region in July — while that’s 6.5 per cent above the 10-year average for the month, it’s a drop of 26.7 per cent from June, and a year-over-year decline of 18.9 per cent.
But not everyone believes it’s time to panic. In a press release accompanying this week’s data, REBGV President Dan Morrison emphasized that home sales activity in Metro Vancouver actually “showed some moderating signs in late June.” And in comments to Global News on Saretsky’s numbers, Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate, encouraged market watchers not to jump to conclusions too quickly.
“[It] seems a bit high to blame on a tax that is only targeting a specific sector of the market,” he said, adding that comparing data for the three months leading up to the tax and the three months after could offer a better perspective.
Douglas Porter, chief economist at BMO, has also cautioned against drawing negative conclusions from early data on Metro Vancouver home sales. Speaking to the Financial Post, he explained that the huge number of property transfer applications filed in the days leading up to the tax “will make July’s data almost impossible to reconcile or analyze. We’ll have to look at July and August or combined. Maybe even September.”
Porter offers a more extensive response to arguments against the tax in a note released late last month. In it, he provides counterpoints to a number of the main criticisms of the tax, including the idea that it’s not needed — in his opinion, it’s long overdue, to the point that “this is a market that cries out for government intervention of some sort.” He also emphasizes that while the tax is by no means a perfect solution, it’s “an entirely reasonable step in the right direction.”
Whether that turns out to be true remains to be seen — for now it’s clear that more time is needed before conclusions are made about the tax.