Summer is a time of weddings, bbq's, trips, time outdoors, patio pops and overall fun times. Summer is definitely my favourite time of the year and I love being outside in Vancouver and enjoying everything that this city has to offer. With that being said it seems our media coverage has been more about new real estate rules than anything. I am going to take a minute to touch base on one of the main topics that we have seen in the recent weeks in Vancouver.
As most of you have probably heard the government has made some changes in an attempt to cool off demand in the Vancouver housing market. They have implemented a 15% tax on all foreign buyers which was active as of August 2nd. They also do not appear to be grandfathering any of the contracts that were written prior to August 2nd. What this means is that if a foreigner agreed to purchase a property prior to August 2nd and the completion date was after August 2nd then they are now going to be facing an additional 15% on top of all other fees that were in there previous agreement. This is causing all sorts of emotions from buyers, sellers, renters and agents. There are reports that are showing a variety of opinions. From my conversations most people are shocked and disappointed in the government for not taking into account those with pre-existing contracts but understand and have accepted the new tax moving forward. Most people think buyers will find loopholes and that we won't see much of a shift.
What have I seen? Well I agree with those that are disappointed that previous contracts are not being held to the same tax laws as when they were agreed upon. It has impacted a few of my clients and it really doesn't seem like a "Canadian" way of doing business. Only time will tell what this tax will do to the economy and the real estate market. In the past week I have seen more deals collapse due to uncertainty than I have seen in the last year. I don't expect this to continue, but I don't blame buyers who have become nervous when the government enacted a significant tax at a moments notice.
We hear the term "affordable housing" almost daily in the news. What price point constitutes "affordable housing"? Is a 15% tax going to bring Westside homes down enough in value to make them "affordable"? The average house on the Westside sold for over $3.5 Million in June. For this number to become affordable to most 9-5 workers in Vancouver we will need to experience a full blown recession. I am not convinced that a 15% tax on foreign buyers will do this, but again... time will tell.
One thing that I am seeing are buyers looking to assign their pre-sale contracts before completion as they are wanting to get out of this tax burden. If you are looking to pick up an investment property this could be a new alternative for local buyers.
Here is a great article breaking down the new tax:
Overall I expect August to show lower than average stats. I expect the tax to cause buyers and sellers to put a slight pause on their plans to see how things shake out. I don't expect a massive fallout in prices but the media will point to changes in the market which will add to the uncertainty. Only time will tell how this all plays out...