Photo: David J Laporte/Flickr
Metro Vancouver’s new foreign buyers tax will probably help lower housing prices by reducing home sales, says Fitch Ratings in a report released this week, but in doing so it may leave the area more vulnerable to unemployment rate changes.
Speaking to The Globe and Mail, Susan Hosterman, Fitch Ratings’ director of US structured finance, said that before the new tax was introduced on August 2nd, the market was getting a lot of support from foreign buyers — they were creating more housing demand, and that in turn was raising prices. But now, with fewer foreign buyers on the scene, “Vancouver is more susceptible to Canadian supply and demand behavior, which is mainly driven by employment.”
Recent Statistics Canada data shows that Vancouver’s unemployment rate was 5.5 per cent in July, the lowest in the country. However, Hosterman emphasized that while that figure indicates how strong job growth has been lately in the city, slower job growth elsewhere in the country raises the question of how long that strength will last — by comparison, Ontario’s unemployment rate stood at 6.8 per cent in July, while Montreal’s was 7.9 per cent.
Of course, the agency’s prediction depends on the foreign buyers tax being effective at reducing housing demand and prices in Metro Vancouver. And while some have been quick to argue that it is having an immediate impact on demand, so far most experts believe it’s too soon to tell what it will do.
For its part, Fitch Ratings believes that the Metro Vancouver housing market was already beginning to cool before the tax was introduced on August 2nd. As evidence, it points out that the region’s monthly home sales have dropped 21.5 per cent since peaking in February, and notes that last month national home sales were down 2.9 per cent year-over-year.
Many market watchers expect August home sales data from the Real Estate Board of Greater Vancouver to provide a better idea of how the tax is affecting the Metro Vancouver housing market. It is scheduled for release at the beginning of September.