New B.C. government data show the percentage of foreign buyers snapping up properties in Victoria surged in October, fulfilling predictions that the province's tax on international buyers in and around Vancouver would prompt them to seek cheaper deals elsewhere.
Foreign buyers purchased more than 6 per cent of all Victoria-area homes that changed hands in October and accounted for about 10 per cent of all the value of the property sold.
The increase in demand is almost double that of the previous month and stands in sharp contrast with the Metro Vancouver region. In that cooling market, foreign buyers rebounded slightly to purchase 3 per cent of all homes sold in October, but are still buying well below the double-digit rates seen before the province launched the 15-per-cent tax in August.
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Across the rest of British Columbia, foreign buyers were involved in 3 per cent of all residential home sales in October.
Tom Davidoff, an economist at the University of British Columbia, said that, as expected, the new tax seems to be pushing international buyers beyond the 22 Lower Mainland communities that have the levy.
"It's encouraging that the basic laws of economics seem to work," he said, noting B.C.'s housing market appeared to defy logic at times over the past several years.
Realtors, economists and industry insiders have also said international money could shift east to Kelowna and Toronto, but data are unavailable because B.C. does not separate the statistics for that city and Ontario does not track foreign ownership.
In and around Victoria, foreign buyers paid on average $987,953 for a home in October, which is $414,000 more than Canadians or permanent residents did. Across the province, foreign buyers paid $300,000 more than locals did from June 10 to the end of October, according to government data.
Prof. Davidoff said the impact of the foreign buyer tax on Victoria's relatively small market is ambiguous.
"Because the surge in demand in Vancouver was pushing locals to the island and now when Vancouver cools down there's less of that," he said. "But on the other hand, there's going to be more foreign buyers there.
"So the interesting question is: What's the net effect on prices there in Victoria? I suspect it's close to a wash, but it could go either way."
Mike Nugent, president of the Victoria Real Estate Board, said he has not heard much anecdotal evidence from his trade organization's 1,300 realtors that more foreign citizens are flocking to the region.
He estimated about two thirds of buyers are locals "doing lifestyle changes" and moving to newer subdivisions or condos.
"I wish I had a year's worth of [foreign buyer] stats so we could compare them and have a better idea of how it was going," Mr. Nugent said.
Prof. Davidoff said October sales data offer a better picture of what the eventual percentage of post-tax international buyers will be in Metro Vancouver. That's because stats from the previous two months were "polluted" by a rush of foreign purchases and the subsequent slump in sales while foreigners and locals alike waited to see how the market would react, he said.
"We knew we were going to be below the previous levels of 10 to 15 per cent," he said. "My best guess is 3 per cent would be the steady state level."
Gauging the ripple effects of the foreign buyer tax in the months ahead could be difficult as a raft of federal measures continue to cool Canada's housing markets. Those include stress-testing a wider range of mortgages, which would make it more difficult for some borrowers to get approved, and closing federal loopholes that some foreign buyers have used to avoid paying capital gains taxes.
On Tuesday, Cameron Muir, chief economist at the B.C. Real Estate Association, forecast that the average price of a home in the province would drop 6.4 per cent to $654,200 next year.
Mike Hager