There has been a slow uptick in the number of foreign buyers investing in Metro Vancouver real estate, but it’s still drastically down following the August introduction of the B.C. government’s foreign tax, according to latest Ministry of Finance figures.
Property transfer tax data for November showed that 4.1 per cent of all residential transactions in the region that month involved foreign buyers, up from three per cent in October. Immediately after the 15-per-cent tax was introduced, less than one per cent of real estate transactions involved foreign buyers.
But the 204 transactions involving foreigners in November were just a fraction of the 1,974 that Metro Vancouver saw in the seven weeks before the tax came into effect. According to Andrey Pavlov, who specializes in real estate finance at Simon Fraser University, that’s strong evidence that the tax is having its intended effect on the market.
“There is a huge drop,” Pavlov said. “There may be some seasonal variation, like there normally would be on all transactions, but the drop is so significant that it couldn’t possibly be explained by seasonal variation.”
Foreign buyers seem to be shying away from the luxury market in particular. Province-wide, just eight properties valued at more than $3 million were purchased by non-nationals in November, down from 95 in July. The under-$1-million market was far busier, with 304 purchases in the same month.
In all, foreign nationals bought $295.8 million worth of residential property in B.C. in November, and $3.5 billion in the six months beginning in June.
That month marked the province’s first efforts at tracking foreign purchasers, so there’s no data from previous years to compare with the 2016 numbers. That makes it difficult to draw any real conclusions about the impact of the tax, according to Pavlov.
“We’re not going to have apples to apples comparisons until next June,” he said.
What is clear is that the tax is producing significant revenues, which the province has promised to reinvest into affordable housing projects. In the first four months of the new levy, the province brought in more than $49 million in extra revenue from foreign buyers. About half of that — $24 million — was in November alone.
In all, the government projects that about $2 billion in property transfer taxes will be paid in the 2016/17 fiscal year, up from $1.5 billion last year.
The latest data also show an overall decrease in the total number of property transfers between June and November — a decline of about 42 per cent in the residential market. Real estate sales do tend to slow down in the fall and winter, and the province could provide no numbers from previous years to compare with this slump.
However, Pavlov believes there’s evidence of a significant downward trend, something he attributes in part to federal policy measures like tougher mortgage qualifying requirements.