Realtors, investors and property owners are already seeing the effects of the foreign homebuyers tax introduced earlier this month, new data suggests.
The number of homes sold in the Vancouver area so far this month is dramatically lower than in August 2015, suggesting the new tax may have halted sales or encouraged house hunters to look elsewhere.
According to new numbers released to realtors and obtained by CTV News, sales have dipped as much as 84 per cent in some areas when compared to the same period last year. The data is based only on sales from Aug. 1 to Aug. 15.
The steepest declines were found in areas with a historically high percentage of foreign buyers.
In Richmond, only 14 detached homes were sold in the two-week period this year, while 89 were sold at the same time last year.
Year-over-year, sales dropped 71 per cent in the City of Vancouver, where only 39 detached homes were sold this year compared to 135 last year.
The sharp drop-off may be in part due to Metro Vancouver's new tax on foreign buyers , which was passed in late July by the BC Liberals. The tax forces foreign nationals to fork over an additional 15 per cent of the home's value in property transfer taxes, in what the government called an attempt to quell competition local buyers face.
Recently released data showed that foreign buyers make up about 10 per cent of property sales in the area, so at least some kind of decline is to be expected. With the average Vancouver-area residence selling for about $633,000 last month, buyers outside Canada would face an additional tax of more than $99,000.
Realtor Ian Tang said he's seen a dip in the number of offers made since the tax came into effect.
"The market was already slowing and plateauing based on prices getting too high and it being summer, then they implemented a tax that created a lot of uncertainty in the market," he said.
"It's made buyers very wary and a bit hesitant to purchase."
The additional expense may be pushing those buyers out of the Metro area, and the British Columbia Real Estate Association is already seeing an increase in sales elsewhere in the province.
Cameron Muir, chief economist for the BCREA, said the drop in home sales in Vancouver has been offset by increases in Victoria, Chilliwack and the Okanagan. Although the tax may redirect foreign buyers outside of Vancouver, he doesn't expect the tax to impact the province overall.
"The market is being driven by people who live, work and raise their families in these communities," he told CTV News.
Muir said the tax is likely to continue to affect Vancouver sales, but that the Metro Vancouver market showed signs of cooling even before it was introduced.
"The trend is going to have a much sharper drop-off as we see the foreign buying activity drop out of the marketplace, but overall the market has been out of balance for quite some time."
However, Muir added that two weeks of data likely isn't enough to make any sweeping assertions.
The tax has shifted its prediction, but the BCREA still expects 2016 to be a record-breaking year for residential sales. The association credits B.C.'s strong economy, migration patterns and increase in housing starts.
The BCREA predicts the province's sales will climb 10.4 per cent from last year's total, with approximately 113,000 units sold.
The group does expect the demand to cool off, and predicts sales across B.C. will decline next year by about 8 per cent (104,000 units).
Though the number of sales may decrease slightly, the average price is forecasted to increase by 11 per cent to $706,900.
For Metro Vancouver, the BCREA predicts the number of sales in 2016 will drop by 1 per cent from last year, and another 6.6 per cent in 2017.
Similar to trends forecasted for the entire province, the average MLS price in the Metro area will still increase. The association expects an average price of $1.03 million (14.1 per cent increase) this year, and $1.09 million next year (a 5.8 per cent increase).
"For those who are thinking that a tax on foreign buying is somehow going to make housing magically more affordable, they're going to be sorely disappointed," Muir said.
Still, experts like Muir across Canada are keeping an eye on other cities that may be more attractive to foreign buyers looking for savings.
A forecast from the BCREA showed sales in Victoria are predicted to increase by 24.3 per cent by the end of the year, while sales on the island overall are expected to grow by 22.6 per cent.
In the Sunshine Coast area, the forecast is an increase of 7.6 per cent, and in Fraser Valley the number of units sold is expected to grow by 18.2 per cent.
Realtor Danny Evans said the valley is still busy but prices are starting to lower.
"There are some bidding wars, but most of it is coming back to more mainstream real estate," Evans said.
The Chilliwack area will see a growth of 34.6 per cent, Kamloops will grow by 19.5 and the Okanagan Mainline by 18.6, according to the forecast. Increases are also predicted in the south Okanagan, northern B.C. and the Kootenay area. Unsurprisingly, the average MLS listing prices are expected to increase in all regions being monitored by the BCREA.
Thousands of kilometres away, officials in Toronto are watching their numbers closely for signs of growth in Canada's largest city.
The Royal Bank of Canada is also watching the Vancouver and Toronto markets, with its CEO stating earlier this week that both cities need to be prepared to react quickly.
The bank was asked about the possibility of a market crash in both cities, but Edward Jones analyst Jim Shanahan told The Canadian Press there is no data to suggest a correction is coming.
With files from CTV Vancouver's Nafeesa Karim, CTV Toronto's Paul Bliss and The Canadian Press
