August 2016 Market Update
The most recent Vancouver real estate statistics indicate a market that is adapting to a new reality. We can see evidence in these numbers that many took a wait and see approach (declining sales numbers). What is not apparent is any indication of a significant correction (skyrocketing inventory and drastic declines in the Benchmark Home price). The reality (as it often is) is complex and nuanced.
These statistics are of particular interest to us because they are the first numbers recorded after the introduction of the Foreign Investor Tax. The 15% tax took effect on August 2nd, 2016 and applies to any property purchased by non-Canadians within the GVRD.
Prices did not show any significant signs of decline in the month of August. The average price did drop sharply. With the higher-end of the market at a standstill, lower-end properties that did sell brought the average down along with it. This reflects the impact of the introduction of the foreign investor tax as the high-end houses were most commonly targeted by these buyers. The more accurate Benchmark price index was relatively flat in the month of August, indicating that prices remained firm.
The active listing count has been close to historical lows for much of the last year. For the last twelve months, the active listing count has hovered at record lows. In August, that did not change as they remained at the lowest level of any August in the last decade. If the market were in a significant correction this count (the supply) would skyrocket as sellers panic.
What appeared most affected by the implementation of the new tax were detached properties and specifically the high-end of the Westside property market. This would be consistent with anecdotal evidence that foreign buyers were most active purchasing houses on the westside. Sales of westside houses were down nearly 60% year over year, yet east Vancouver apartment sales were off only 10%. In the condo market we are frequently seeing multiple offers and over asking price sales.
We believe that the August 2016 statistics do not indicate a significant correction is underway in the Vancouver real estate market. There was certainly a serious impact made by the introduction of the Foreign Investor Tax but this was reflected predominantly in sales volume. A sharp rise in the active listing count (beyond simply returning to more historical norms) would be a sure sign a correction was underway. We feel that the current situation is temporary and that in this window of uncertainty there is an opportunity for people to step in and take advantage of the confusion of others.