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Sales activity in the Vancouver area's real estate market has slumped amid uncertainty over a new B.C. tax on foreign buyers, as bidding wars dry up for homes that would have attracted multiple offers earlier this year.
Home sales in the Vancouver area fell by 33 per cent in September compared with the same month last year as the market adjusts to the B.C. government's 15-per-cent tax on foreign buyers, according to data released on Tuesday by the Real Estate Board of Greater Vancouver. The tax took effect on Aug. 2.
Figures from Toronto to be released on Wednesday could offer more detail on whether the measures aimed at cooling Vancouver's market have pushed investment east into Canada's largest city, as some have predicted. The Toronto region's strong real estate sector has fed similar anxiety about foreign investment and speculation.
The numbers on Canada's two largest housing markets come the same week Ottawa moved to close tax loopholes used by some foreign buyers and to tighten mortgage rules.
Those policies are in addition to B.C.'s foreign-buyers tax and Vancouver's plan for a tax on homes left vacant by speculators – all designed to curb what has become a housing affordability crisis.
The Vancouver area's benchmark prices – which the industry says are representations of typical properties – have set records or remain near their highs, according to the numbers released on Tuesday.
Dan Morrison, president of the Real Estate Board of Greater Vancouver, said it is unclear how much the B.C. tax has affected sales because the market was already slowing in July. He said the uncertainty created by the tax has prompted some prospective buyers to step back.
"Buyer fatigue has been a huge factor, especially in the detached house market. Now, we're not having those crazy multiple offers," Mr. Morrison said. "To get back to a more typical market is a healthy thing."
Early data from the B.C. government show the number of foreign buyers in the Vancouver area's housing market dropped in the first month of the tax, although some of that was due to a rush to close transactions before Aug. 2.
It could be difficult to gauge the ripple effects of the foreign buyer tax in the months ahead as Ottawa adds its own measures into the mix. Finance Minister Bill Morneau announced a range of changes on Monday to cool housing markets in Canada, including 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 gain taxes.
The housing market of Greater Toronto has so far not had the same slowdown as Vancouver. In August, for example, the volume of home sales in Vancouver fell by 26 per cent, compared with the same month last year, while in the Toronto region sales went up by 23.5 per cent.
Toronto Mayor John Tory wants the Ontario government to begin monitoring property purchases by foreign buyers, although Queen's Park has yet to commit to the idea of gathering more housing data.
Gelareh Jin, a Toronto realtor, said interest in Canada's largest city has picked up since she canvassed prospective clients during her last business trip to China in July. "At the time, we almost had to peel them off Vancouver, and say, 'Hey, Toronto's here too,'" Ms. Jin said. B.C.'s new tax "definitely allows them to give a second glance to the other parts of Canada."
Sales could increase slightly in Seattle, San Francisco and Los Angeles, but these cities are already overpriced in the eyes of many Chinese buyers, said Aaron Terrazas, senior economist at real estate data firm Zillow. International investors seeking better returns are more likely to find bargains in Sydney or London, he added.
Still, it is too soon to gauge to what extent new measures will redirect the flow of international funds away from Metro Vancouver's housing market, he said.
"It's too early to look at transactions – it's hard to see how much page views or traffic to a particular listing site are going to translate to a closed transaction," Mr. Terrazas said.
Many Chinese investors could still buy property in Canada because they have family already living here, he said.
Dave Platter, a spokesman for Juwai.com, a leading online property listing service targeting Chinese buyers, said many foreign investors – and locals – are probably waiting to see how the Vancouver market continues to adjust to the uncertainty introduced by governments over the past three months, including the B.C. tax.
"This tax in itself isn't necessarily a deal killer," he said from Sydney. "Apart from paying 15 per cent, they want to know what's happening in the market."