The price of a typical detached house in Greater Vancouver soared to $1.58-million in July – the final month before British Columbia's new tax on foreign buyers, which threatens to cool the red-hot real estate market, took effect.
Even though the number of houses changing hands in the region declined 18.9 per cent from a year earlier, the data reveal yet another strong showing in a remarkable housing rally.
"We're still in a seller's market. You're not going to see much downward pressure on prices until the sales-to-active-listings number falls below 12 per cent, and we're a long way from that," said Dan Morrison, president of the Real Estate Board of Greater Vancouver.
Benchmark prices for Greater Vancouver detached houses soared 38 per cent over the past year to $1.58-million.
Over the past three years, the benchmark price (a representation of the typical property sold in an area, excluding the most expensive transactions on the Multiple Listing Service) for detached houses has skyrocketed 81.1 per cent to $1.53-million on Vancouver's east side, while surging 73.4 per cent to $3.59-million on the west side.
Still, the slowing sales volume in Greater Vancouver raised questions about early signs of a weakening market. Some industry experts predict a slowdown in transactions in the months ahead after the introduction of a new 15-per-cent tax on foreign buyers that took effect on Tuesday.
Last month, there were 3,226 sales of detached houses, condos and townhomes in Greater Vancouver – 6.5 per cent higher than the 10-year average for July. It marked the first time that the monthly number of properties changing hands in the region dropped below 4,000 since January, when there were 2,519 sales.
March, April and May are traditionally the busiest months for sales of existing properties, with activity slowing from June until mid-September.
Mr. Morrison said the year-over-year slump in sales was also magnified by an unusually strong July in 2015, when there were 3,978 sales. By contrast, sales volume was 2,946 in July, 2013, and 3,061 in July, 2014.
On July 25, the B.C. government announced the new property transfer tax on foreign buyers who acquire homes in the political entity known as Metro Vancouver. The extra tax took effect on Tuesday for any purchases registered with the province's land title office.
On a $2-million home, for instance, a foreign buyer will pay an extra $300,000 for the property transfer tax, on top of the $38,000 in provincial tax that applies to all purchasers.
David Ley, a professor of urban geography at the University of British Columbia, said the new tax on foreign buyers will have a dampening effect on the Vancouver region's housing sales and prices. "I would expect the market to cool," he said. "Let's say for the sake of argument that prices come down 10 per cent. Presumably, that will open the door to some local buyers who are shut out. But prices would still be extraordinarily high."
There were a record 5,173 sales of residential properties in March, and while there is a traditional seasonal slowdown from the spring to summer, the new tax might erode demand.
Researcher Andy Yan, acting director of Simon Fraser University's city program, described the new levy against foreign buyers as a "transactional tax" that will have a short-term impact. While the focus has been on an influx of buyers from China into several neighbourhoods on Vancouver's west side, Mr. Yan said other factors such as low interest rates, population growth and limited housing supply will continue to play roles in supporting the housing market's rally.
The new tax seems unlikely to dramatically decrease the flow of capital from China into Metro Vancouver over the long term, Mr. Yan said. "The membership fee to an exclusive club has gone up for foreigners. But my guess is this may be just a speed bump," he said.
The Fraser Valley Real Estate Board said there were 1,962 sales in July in its territory, which includes the sprawling suburb of Surrey. That is down 10.2 per cent from 2,184 transactions in the same month last year. However, the benchmark price for Fraser Valley detached houses sold in July reached $881,400, up 41.9 per cent from a year earlier.