It’s hard to believe this is not a misprint! We are talking about Vancouver Real Estate – the hottest market in the country for several years.
You can read this stunning article from Rob McLister of Canadian Mortgage Trends here. All it took to topple this mighty market was the sudden introduction of B.C.’s new 15 per cent transfer tax on residential property purchases for non-Canadians and non-residents buying houses in Metro Vancouver.
This Financial Post article by Jack Minz explains the transfer tax in greater detail and his view on the implications of it all.
Personally I think the tax was just the excuse the Greater Vancouver market was looking for to self-correct. The tax has proven unpopular – with a few innocent casualties (returning ex-pats) who all of a sudden were assessed with mammoth additional closing costs.
I doubt Vancouver’s fall from grace has completed, but when the dust finally settles, economic realities will set in again, and Vancouver house prices will continue to be strong in years ahead. Bloomberg News’ Gregg Quinn and Jacqueline Thorpe today reported National Bank’s chief economist Stefane Marion is calling for a”healthy correction” of at least ten percent. I’d say that’s a safe call with the market already dropping 17% in one month.
Foreign investors may well turn their attention from Vancouver to Toronto real estate and other markets like Calgary, which seems to be finding its legs again. Toronto Real Estate remains very strong – a clear sellers’ market – but perhaps with not as much madness as we saw in the spring of 2016.
The decision to introduce the tax was made by the (NDP) BC Government. Could something similar happen in other provinces? I suppose yes, it’s theoretically possible, but it’s a very tricky thing to manage, and I suspect other governments around the country will follow this Vancouver story with great interest before plunging in too. I cannot imagine the BC Government expected such a wicked free fall in such a short time.
Pity all the poor Vancouver home buyers of 2016 – I imagine many of the hi-ratio purchases made this year are already “underwater.” I wrote an explanatory article about underwater mortgages five years ago.
For a few years here in Toronto, doomsayers have been looking for signs our market is headed for a crash, or at least a healthy correction. And yet our market continues to climb this “Wall of Worry”.
They may feel emboldened now to dust off those articles from 2013 to 2015 and tell us all “See – I told you so!
Regardless of which city or township you live in, if you retain a long term view about home ownership, and understand the recent gains in net worth you have made in the past couple of years were actually fantastic and unsustainable, there is no reason to panic.