The BC government’s foreign-buyer tax was introduced around the same time as the Chinese government began taking a tougher approach to its citizens’ investments outside the country. Ever since this one-two punch landed, activity in the Vancouver housing market just hasn’t been the same.
Look at the most recent foreign buyer data available for the month of October and compare it to the market peak in June 2017 and you’ll see a staggering decline in the amount of money being spent by foreign parties in the Vancouver real estate market. The impact on luxury housing has been the toughest for the market to shake off.
“As of October, property transfer tax data from the BC Government shows foreign buyers were involved in $135M of residential transactions across the province. That remains well below the cycle high of $400M in June of 2017,” writes Vancouver-based realtor and market commentator Steve Saretsky on his blog.
“That $135M represents just 1.87% of total transaction volume for the month of October. In other words, foreign buying has dropped off significantly over the past couple of years. Thus, it shouldn’t come as a surprise that luxury real estate in the city of Vancouver remains sluggish, despite the recent recovery in parts of the more affordable housing market,” he continues.
And as wealthy Chinese investors continue to face tighter restrictions on where they can park their money, Vancouver isn’t the only housing market taking a hit.
Saretsky points to recent reporting from Bloomberg that shows Los Angeles condo sales have plummeted 31 percent over the third quarter of 2019 when compared to the same period last year.
According to American real estate brokerage Douglas Elliman, Chinese buyers have been involved in 50 percent of purchases in downtown Los Angeles over the last few years. With investors facing what are known as capital controls instituted by the government, the LA market has seen the wind taken out of its sails.
But while the two West Coast markets are feeling the cooling effects of the Chinese capital drying up, real estate brokerage Re/Max believes that the Toronto luxury housing market may benefit as these buyers look eastward.
In a November report, Re/Max noted that buyers from Mainland China are gradually returning to the GTA’s luxury market following a period of inactivity after the foreign-buyer tax was introduced by the Liberal provincial government in 2017.
“During the run-up in 2016 and 2017, Chinese buyers were responsible for an estimated 60 per cent of home-buying activity over the $6 million price point,” Re/Max says in a media release.
Not only does the brokerage anticipate that wealthy buyers from Mainland China will stoke demand for luxury real estate in Canada’s largest city in 2020, it also expects investors from Hong Kong to ramp up interest in the Toronto market as the political conflict in the Chinese autonomous region worsens.
For now though, the Vancouver market doesn’t look to be showing signs of recovery where foreign buyers were once a major driving force. But it’s good to know that the city isn’t alone, with Los Angeles also feeling the (lack of) heat from Chinese investors who need to keep their capital closer to home.
