Photo: Guilhem Vellut/Flickr
Metro Vancouver’s new foreign-buyer tax came into effect nearly three months ago on August 2nd, and the BC government has now released the second round of data on foreign investment in residential real estate since it was put in place. It shows that foreign buyer activity in Metro Vancouver remains much lower than it was before the tax was instated.
Released October 28th, the data covers the month of September and shows that during that time foreign buyers were involved in only 1.8 per cent of residential real estate transactions in Metro Vancouver. While that’s higher than the 0.9 per cent seen in August, it’s well below the 13.2 per cent of residential real estate deals that involved foreign buyers between June 10th and August 1st. June 10th is the day the BC government began collecting data on foreign buyers.
Chart: Province of BC
“The number of offshore purchasers has dropped dramatically, and that means the pressure on local purchasers, often first-time purchasers, is much reduced,” said Cabinet Minister Andrew Wilkinson, speaking on behalf of BC’s finance minister. “That’s exactly what our goal was and we’re glad to see the market is calming down.”
The total value of Metro Vancouver residential real estate deals involving foreign buyers also remained low in September. In all, 5,150 transactions valued at $4.5 billion were recorded that month, with foreign buyers accounting for 1.8 per cent, or $79.2 million. That’s compared to $46.9 million in August and $2.3 billion from June 10th to August 1st.
Chart: Province of BC
But while the BC government appears pleased with how the tax is working, not everyone is happy with it. In September, a class-action lawsuit against the tax was filed in the Supreme Court of BC. If it’s successful, it could cost the BC government hundreds of millions of dollars.
What’s more, though the tax has clearly reduced foreign investment in Metro Vancouver residential real estate, it hasn’t yet had much effect on home prices. Last month, the MLS Home Price Index composite benchmark price for all homes in the region was sitting at $931,900. That’s a 0.1 per cent decline from the previous month, but a 28.9 per cent increase year-over-year. Many believe prices will eventually cool, but slowly.
In the meantime, market watchers may want to keep an eye out for further BC government announcements. The plan is for further measures aimed at supporting affordable housing in Metro Vancouver to be introduced in the coming weeks.