Although it is too early to measure the impact of the recently announced 15% foreign buyer tax on the greater Vancouver market over which it applies, there are no shortage of pundits making predictions and claims based on as yet incomplete or anecdotal data.Getting a handle on the impact will take a few more months yes, considering that the tax was implemented near the end of what was in fact a third month in a row of declining sales activity and increased listings, going into what is traditionally one of the softest months of the year. August is largely a time of squeezing in that last week or two camping, sitting around a lake, or relaxing in general. House selling and house buying largely not a thing that most families want to address just before the school year starts.
Time will tell whether a market that had frenzied activity with prices a whopping 27% higher than just one year before will absorb a 15% overnight spike for a certain segment of buyers and keep on booming.
In any event, despite the data in the following story, the greater Vancouver employment numbers remain the envy of the nation. People go where jobs go, and values stay strong where people are. So with no excuse to leave the city and little motivation to sell it is likely that if prices do start to soften so will the available supply. And of course as supply contracts price resistance firms up.
In other words, while this tax may well have a psychological impact on the market for a few months or more, and it may slow volume, listings, and construction (further tightening supply), immigration and migration forecasts into British Columbia remain strong with the estimated 4,000 new people per month all looking for a roof over their heads.
Many would argue that this could create yet another surge in values come the Spring of 2017. If it truly is a story of supply and demand this may well be the case. Time will tell.The larger concern for Canadians in general should be the way in which the tax was introduced, with zero notice and a retroactive and totally destructive effect on existing contracts. Their seemed to be a misunderstanding of who exactly a foreign buyer was, and no shortage of stories of arisen of local tax paying residents with applications for permanent resident status pending getting caught with an unaffordable $45,000.00 bill on a $300,000 condo purchase agreed to just weeks before the announcement.
This of course has affected many Canadian citizens on the other side of these transactions which the about-to-be-a-new-Canadian was simply unable to afford to complete.
Such a sweeping, abrupt, and arguably unfair implementation could be construed as a protectionist policy that could be implemented without notice in any number of communities where housing costs are perceived rightly or wrongly to be impacted by ‘foreign buyers’ a term which for many of us would include our siblings, parents, and or grandparents at any given point in history.
Will a tax like this pop up in Toronto, Montreal, Lake Louise, or Whistler?
There is little way to be certain. And this is perhaps the biggest concern for anyone entering into a purchase or sale agreement as or with a ‘foreign buyer’ anywhere in Canada at this time.
Certainty has been removed from the contractual process by this new (retroactive) precedent set by the BC government.