Ever since the 15% tax on foreign investors, we have been hearing constantly about how the average price of a home in Greater Vancouver continues to drop. This is, in fact, true, we have seen a significant drop in the average price of homes, particularly on the West Side, and in surrounding cities that are further out. But, was the 15% tax really the cause of this drop? To be fair, the tax probably helped accelerate the rate of prices dropping, but we were already seeing some adjustments before the tax.
When the market is in such a frenzy, it grows at exponential rates. People start to get desperate after losing out on offers so the next one they see, they will bid for it and with a non-subject offer. But at the same time, prices will eventually get to a point where more and more people will feel that it just is not worth it anymore. The market for single detached homes definitely reached that point, and we were able to see a slowdown in the market. Right afterwards, the 15% foreign investor tax came out, which most likely accelerated this decline in demand.
Nowadays, we see the pricing adjusting to a more ‘acceptable’ pricing, but keep in mind, prices are still higher than what it was just 5 years ago. We still see condo prices continue to grow, though, and with some highly desirable units or lower priced units, there are still multiple offers and the units would sell for over list price. In the end, the single detached homes are still listed for millions of dollars. Townhouses are all close to $1M and up, and with an average salary, condos are still the way to go for most people. For foreign investors, 15% on $750,000 for a 2 bedroom condo downtown is a big difference compared to a $4,000,000 home, so it just directs their attention elsewhere. If we are still seeing a steady growth in the condo market, did the 15% foreign investors tax really help adjust our market?
It’s always good to consider both sides of the argument, so read more about that here.