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Realtor Clara Hartree recently listed the house at 4658 Piccadilly North in West Vancouver for $2.485 million. She says West Vancouver houses are selling, but at drastic discounts.Re/Max

Vancouver’s high-end house values took a major tumble last year, with the number of houses valued in the $3-million-and-over range dropping by almost a third.

Research by Simon Fraser City Program director Andy Yan shows that 4,397 Vancouver houses priced at $3-million or more in 2018 had by 2019 fallen below that mark – a 28-per-cent drop. As well, the number of buyers who paid the foreign-buyers tax in key areas of Metro Vancouver had fallen so low that the numbers were not reportable by municipality. Mr. Yan has seen a steep downhill direction on payment of the foreign-buyers tax since the province introduced the tax in 2016.

“There seems to be a sea change in Metro Vancouver where a torrent of foreign buyers has become a dribble,” Mr. Yan says. “The most dramatic changes were in West Vancouver, where, for 10 out of 12 months, the foreign buyers were below the reportable threshold.”

In the city of Vancouver, the market most driven by the foreign buyer had been that for the single-family house on the city’s west side, including First Shaughnessy, where many of the recent price drops occurred. In 2018, the government introduced a series of measures aimed at foreign buying and speculation. Some measures included an additional 20-per-cent foreign property transfer tax, a Speculation and Vacancy tax (SVT) that targeted people who don’t pay taxes in B.C., as well as an increased school tax on homes valued at more than $3-million.

Mr. Yan says he believes the measures have played a key role in driving home prices down, particularly on the west side of Vancouver, in West Vancouver and Richmond, where detached houses are now in a buyer’s market. He says they are achieving the government’s goal of removing speculation from the housing market and returning it to local incomes.

Developer Michael Geller completed his Ambleside Mews complex in West Vancouver a year ago, but still has three of the four units unsold, largely, he says, because downsizers can’t sell their houses at the prices they want.

“There’s no doubt that we are witnessing a number of market downturns, especially in West Vancouver and Westside Vancouver. I still have three of the four homes to sell at Ambleside Mews, in large part because although potential buyers repeatedly tell the real estate agent they love the homes, they can’t sell their houses at the prices they want. Also, many West Van buyers are uncomfortable with the strata ownership, which is odd since this is not a problem at all in Vancouver.”

The problem for Mr. Geller, realtor Clara Hartree says, is that buyers of West Vancouver houses are refusing to pay the millions they were willing to pay three years ago. It means homeowners are less inclined to sell and downsize. Ms. Hartree has been a realtor on the North Shore for 33 years, and she believes foreign money is still flowing into the market, just not at the volume it had been. She’s seeing an uptick in buyers from Hong Kong.

“The [buyers] get properties at huge discounts and they have been using the lower assessed values to negotiate,” she says. “They may already live in Richmond, and they want to move to the North Shore, which happens a lot.”

She said she has rarely seen anyone pay the foreign-buyers tax.

When asked to comment on Mr. Yan’s analysis, provincial Minister of Finance Carole James responded with a statement by e-mail: “For too long our housing market was left to spiral out of control, creating a real estate market where money launderers and speculators flourished, and families fell behind. Increasing the foreign-buyers tax rate from 15 to 20 per cent and expanding it to areas beyond Greater Vancouver is helping to moderate B.C.’s housing market and is just one part of our 30-point housing plan. We want to make sure everyone is fairly contributing to provincial services and programs in return for the high quality of life they enjoy in this province. Revenue from this tax is supporting government’s record level investments in childcare, affordable housing and health care measures.”

Michael Geller's Ambleside Mews in West Vancouver was completed a year ago but three of the four units haven't sold. The 2,810 sq. ft., four-bedroom unit at 1177 12th Street is listed for $2.490 million.Geller Group

Josh Gordon, assistant professor at SFU’s school of public policy, is working on a report on the Vancouver housing market. He is not only a proponent of the tax measures, but he’d like to see them go a step or two further.

Prof. Gordon said the foreign-buyers-tax data are not an accurate or complete reflection of foreign speculation because the main issue has always been about whether the money flowing into the market is foreign, not buyers’ citizenship status. Foreign-sourced buying, he says, has put Canadian income-earners at a big disadvantage and shut many out of the housing market in the past five years.

He said the SVT has had the biggest cooling effect on the housing market, because it took direct aim at foreign ownership and thereby weakened speculative behaviour. The tax requires owners to declare whether most of their income is domestic or foreign. That’s key, he said, because a buyer might have Canadian citizenship but be using foreign income to buy into the Canadian housing market. The SVT addresses that situation by applying a tax to satellite families where most income is coming from offshore.

Prof. Gordon says he believes the tax could have even more impact eliminating an exemption that allows satellite families to avoid the tax if they rent out part of their property. That exemption, he said, doesn’t make sense because those families are not paying their fair share of taxes.

“By taxing satellite families in addition to foreign owners, the government aims to discourage the ownership of housing based on foreign income or wealth,” he said. “That measure has had a more significant impact on the market in my view, and its impact could be increased or intensified by revisions to some of the rental exemptions that are granted in the tax.”

And while some argue that the taxes have still not resulted in affordability, he argues that they are moving in the direction of affordability – which is better than the alternative.

“These taxes should become a permanent feature of the policy landscape. The issue is that wealthy individuals from abroad can potentially access the amenities and social services that are generated in Canada and are paid for in substantial measure by income taxes, while they bypass having to pay income taxes.

“So long as that dynamic is possible or present, a measure such as the SVT is needed. It is a backstop to your income tax system; it means that you can ensure that everyone is paying their fair share towards Canadian public services and amenities, and it helps level the playing field between local buyers and those with foreign income or wealth.”

Mark Goodman is a principal of Goodman Commercial, marketer of multifamily commercial buildings, development sites and land, and publisher of The Goodman Report newsletter.

According to the Goodman website, Mr. Goodman has sold more than $2.3-billion in apartment buildings and development sites. Mr. Goodman said he brokered the land assembly of several Kerrisdale co-op buildings that were redeveloped into high-end condos.

He said the provincial taxes are countereffective because they focus too much on demand. Instead, increased supply of housing provided by free market forces would lead to affordable housing, he said. As well, the industry would like to see fewer restrictions. He cites rent control, rental only zones, various taxes, a slow permit process and city councillors voting against projects as some of the restrictions they are facing.

“It’s been proven that supply side measures really work, and it doesn’t seem like we are doing enough to encourage that,” Mr. Goodman said.

Mr. Goodman said developers are leaving the city because of too many restrictions.

“It’s difficult as a broker when you are meeting with developers. These are the decision makers. These are the ones who are helping our city to build rental units, and they’re like, ‘yeah we can’t make the numbers work so we’re leaving. We’re not going to build in Vancouver. We are done in Vancouver.’ It’s very frustrating.

"I’m not going to tell you who they are, but there are a lot of developers who’ve walked from deals we’ve had under contract.

“Everything that we are doing is not working – the proof is in the numbers. The volumes have come down. Investor confidence was hit hard for a while. Our entire world was turned upside down. … It’s like they gave our industry a lobotomy.”

He said another issue is residents too often oppose density by way of taller buildings. At a recent Urban Development Institute event for industry members, he said the feeling was that the industry isn’t valued.

“A lot of the feedback at the UDI was developers sense that they are not being seen as partners, and oftentimes feel vilified."

In particular, social media, he says, is spreading misinformation.

“It’s becoming difficult to get clarity out there, to get the facts, to allow the free markets to do what they do best, and encourage rental development.”

Ms. Hartree is also opposed to the tax measures. She says that trend is costing locals who’d been planning their retirements around their equity.

“Nobody is paying the 20-per-cent foreign-buyers tax. Either they deduct it from the price, or they find a way of putting it in the name of somebody who already lives here. There is no way anybody is paying the tax, or very, very few,” she said.

“Sadly, it’s hurting the local sellers, especially older people in the British Properties. Those are the ones suffering the most with these taxes.”