Consumers no longer feel rushed to snap up homes in the Vancouver region since a new tax was imposed on foreign buyers.
A slowdown in sales, especially for high-end detached houses, reflects how people's moods have shifted away from the "fear of missing out" phenomenon, real estate experts say.
In the Real Estate Board of Greater Vancouver's territory last month, 2,489 detached houses, condos and townhouses sold, down 26 per cent from the same month of 2015.
Greater Vancouver will be among the key markets in the Canadian Real Estate Association's release on Thursday of national housing statistics for August.
The Greater Toronto Area remains on a roll, while Calgary is going through a bumpy patch due to low oil prices.
It is unclear how much of the slump in August sales in Greater Vancouver can be attributed to fewer foreign buyers, notably from China.
Still, the atmosphere now almost seems relaxed, compared with the frantic bidding wars of the past, said Andy Yan, acting director of Simon Fraser University's city program.
"The lexicon has moved away from FOMO – fear of missing out. It is now a case of just chill," he said. "It is a standoff between buyers and sellers. Sellers want the highest price and buyers want the lowest price. The question is who is going to budge first."
Even the perception of less competition to acquire properties has been enough to reduce bidding wars, Mr. Yan said. More data over the coming months will be needed to study the impact of the new tax, and while foreign buyers are not arriving in droves like before, they will still be a factor. "Small numbers still have big effects," he said.
On July 25, the B.C. government introduced a 15-per-cent tax on purchases by foreign buyers in the Vancouver area. It took effect on Aug. 2.
Data released by the provincial government show foreign buyers accounted for 10 per cent of property sales in Metro Vancouver during a five-week period from June 10 to July 14. That proportion may seem small, but in parsing housing statistics, experts say 10 per cent packs a punch.
"I'm of the view that even if we're only talking about 5 per cent or 10 per cent of the market, that is huge," Bank of Montreal chief economist Douglas Porter said. "If you're dealing with a relatively tight market to begin with and then you add 5 or 10 per cent new buyers on top of what is already a tight situation, it can send prices skyward because prices are set at the margin. So, an extra 5 per cent or so can make all the difference in the world in a tight market."
The tax has dampened enthusiasm for detached properties at a time when the market was already slowing from a frenetic pace in the first half of the year.
Sales in August of detached properties in Greater Vancouver, which overlaps with a large portion of Metro Vancouver, declined nearly 45 per cent from a year earlier. The average price of detached houses sold in the region has slipped 0.3 per cent over the past year to $1.47-million as fewer luxury homes traded hands.
But real estate board officials say the benchmark price, which is a representation of the typical property sold in an area, is a better barometer of trends. The benchmark price for detached properties in the Vancouver region surged almost 36 per cent over the past year to $1.58-million in August.
Realtors have begun to encourage sellers to adjust their price expectations, said Jason Soprovich, whose Royal LePage office focuses on Vancouver's luxury market. He has yet to see significant price reductions, although he expects that to start over the next few months.
"People that want to sell, have to sell, they're going to move their prices to get ahead of the market and become more competitive," he said.
Still, Mr. Soprovich expects the tax on foreign buyers to be more of a "speed bump" than something that derails strong price growth.
Most realtors say it is too early to tell how effective the new tax will be in cooling the market over the long term. That would require an increase in listings – homeowners seeking to sell their properties in hopes of getting ahead of a market correction.
Royal LePage chief executive officer Phil Soper predicted the Vancouver region's housing market would slow into next year before rebounding as more buyers are encouraged to jump in.
While the spotlight is placed on Vancouver during boom times, the market also goes through its share of downturns. "Vancouver, as Canada's twitchiest real estate market, does experience more down markets than most places in the country," Mr. Soper said.