OTTAWA (Reuters) - Vancouver’s housing market was already slowing prior to Canada’s introduction in August of a foreign buyers’ tax, the federal housing agency said on Thursday, noting the tax spurred a further drop in the sale of homes, especially higher priced ones.
The city was already seeing a slower pace of sales, a shift towards more condominium sales, and a downward trend in average prices before the 15 percent tax was imposed, the Canada Mortgage and Housing Corp said in a report on the role of foreign buyers and foreign capital in Vancouver’s market.
The housing agency said while it was too early to determine the long-term impact of the tax, which was opposed by realtors and developers, preliminary analysis of August and September resale data suggested the “policy shock” consolidated a slowing trend in the market that was already underway.
“Sales and prices had started to dip before the
introduction of the Foreign Buyers Tax, so it basically underlined existing trends in the resale market,” said Robyn Adamache, principal of market analysis at the CMHC. The average price dropped 17 percent in August from July, partly due to a change in the mix of homes sold away from the higher end of the market, the CMHC report said.
Canadian policymakers have moved several times to cool the nation’s hot housing market, including by tightening mortgage rules, but the foreign buyers’ tax was aimed specifically at Vancouver, where foreign money was blamed for driving up prices beyond the reach of local residents.
Vancouver sales fell in the two months following the province’s move to impose the tax, while Toronto sales and prices continued to soar, which some attributed to foreign buyers moving from Vancouver to Toronto. [L2N1CA0Q1][L2N1CB0GC]
The CMHC report said foreign money was only one factor driving Vancouver’s housing market, and the extent to which foreign buyers have impacted house prices was still “unclear and contested.”
It said high net worth individuals with lots of home equity, as well as population and job growth, low mortgage rates, and low levels of listings have helped drive sales and prices in the city.
Reporting by Andrea Hopkins; Editing by Bernadette Baum