Vancouver’s home sales plunged last month, and while one prominent Bay Street economist warns against giving too much credit to the new tax on foreign buyers, another industry expert deemed the levy a “kick in the face.”
The August numbers released Friday provided the first detailed look at the Vancouver market following the introduction of the 15 per cent levy. While overall sales volume fell 26 per cent below year-ago levels, detached sales pulled back a much more dramatic 44.6 per cent.
Still, prices remain stubbornly high. The benchmark price for a detached property soared 35.8 per cent from August 2015, reaching $1.57 million.
When it comes to the number of homes changing hands, those transactions were already on a downward trend before the tax kicked in.
“The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers,” Dan Morrison, president of the Real Estate Board of Greater Vancouver, said in a release.
Still, Morrison cautions it will “take some months before we can really understand the impact of the new tax.”
CIBC Deputy Chief Economist Benjamin Tal says the foreign buyer tax will likely be responsible for little more than a third of the sales weakness expected in the coming months.
“There is much more to it. This city, this province is experiencing a full-scale affordability crisis,” Tal told BNN.
“This housing market in Vancouver is simply exhausted. Affordability is a major issue.”
While the benchmark price for a detached home rose almost 36 per cent year-over-year, it was virtually flat from July to August.
The benchmark price compares similar-type homes to gauge the changes in price over time. It strips out the effects of both high-end and low-end home sales that realtors argue can skew the results.
The average price includes those extremes. In August, the average selling price of a Vancouver detached home fell 16 per cent from July, sliding from $1.76 million to $1.47 million.
For RateSpy.com Founder Rob McLister, the biggest surprise was that “scary” drop in average home prices.
“There is so much psychology driving this market. This 15 per cent foreign homebuyers’ tax is just a kick in the face,” McLister told BNN in an interview.
“This was not the time for this intervention.”