by Wolf Richter, Wolf Street:
The short sellers are coming: “a money-laundering-induced market.”
The Canadian province of British Columbia may have gotten what it asked for in instituting the now notorious 15% transfer tax on home purchases involving foreign investors.
Benchmark prices of Vancouver still exhibit astounding year-over-year increases, with apartment prices up 27% and detached house prices up 38%, now at C$$1,578,300. But overall sales plunged to 3,226 homes, down 27% from the record in June and down 19% from a year ago.
“This is the first time since January 2016 that home sales in the region have registered below 4,000 in a month,” admits the Real Estate Board of Greater Vancouver. While apartment sales dropped “only” 7% year-over-year, sales of detached homes plummeted 31%!
And it’s spreading beyond Vancouver. For example, housing-refugees make their way to the Fraser Valley, which borders Metro Vancouver. The formerly bucolic and more affordable Langley Township is now highly developed and getting more so:
Prices have soared in the Fraser Valley. In July, the benchmark price of an apartment jumped 25% year-over-year (to C$240,000), according to the Fraser Valley Real Estate Board. The benchmark price of a townhouse soared 34% (to C$408,200). And the benchmark price of a single-family detached home skyrocketed a breath-taking 42% to C$881,400. These price increases put even Vancouver to shame.
But in the Fraser Valley too, sales in July (1,962 units) hit the wall: down 31% from June, and down 10% year-over-year.
So let’s talk more about that 15% tax on non-Canadian buyers of real estate, the result of an early-July emergency session of British Columbia’s provincial government.
Coming to the fore are stories of realtors and sellers alike finding ways of getting around the tax: Could the realtor Carolyn Chen be related to the seller Eddie Chen, who increased the list price by 15% about 2 weeks ago?
“The seller will compensate the qualified buyer with the additional 15% transfer tax,” the ad below says. “Qualified” in this case means non-Canadian; the original description spelled it out more blatantly: “Foreign National buyers get 15% off listing price!”
It’s easy to understand the foreign buyer’s penchant for properties in Metro Vancouver, like Richmond. Among the attractions: it’s only a plane ride away from pollution, and a command of English is not necessary:
So the 15% tax becomes merely the price of doing business or maintaining capital in an ever-devaluing currency. It certainly doesn’t put profit out of reach if 30%+ increases continue… Though we know past performance is no guarantee of future results, the Vancouver housing market time and again has defied the bears prophesying the coming bust.
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