“We saw an immediate stop to real estate in Vancouver and a 23% drop in average price, looking at the entire lower mainland market,” Elton Ash, regional executive vice president of RE/MAX of Western Canada, told REP. “That recovered fairly quickly. By May of this year, the average price was higher than just before the tax was implemented.”
Vancouver’s 15% foreign buyer sales tax was announced in late July of last year in a bid to address affordability issues in what was, at the time, Canada’s hottest real estate market.
And it appeared to do the trick ... at first.
The average home price in Vancouver was $1,007,687 in July 2016; it fell to $833,065 a mere month later.
But then a recovery seemed to begin.
The average price increased slightly in September to $864,566.
$891,705 in October.
And now, most recently, the average price in Vancouver cost $1,053,655 – more than the average home cost just prior to the foreign buyer tax.
“This was the issue around the whole (foreign buyer tax): There is no accurate data as to exactly the number of transactions that non-Canadians are buying,” Ash said. “The government at the time was speculating it was somewhere between 12-15% of the total market. Anecdotally, from our membership, it was less than 5% of the market.”
Ash argues the tax was merely political pandering; a voter-friendly “solution” to a problem.
The real solution to affordability, according to Ash, is to address supply issues.
“This was all done in the name of affordability and the real issue is supply. You can’t tax your way out of a problem. Obviously, at least in my mind, you have to attack the supply side of the equation. It’s simple economics: Supply and demand,” he said, noting it can take up to 10 years for housing projects to gain approval from the government.
“There are 65,000 doors at some point of approval in the lower mainland. Until the municipalities get their act together and address it along with the provincial and federal governments” supply will continue to be an issue.
“Short answer: No,” according to one expert.