Much-tightened strictures on foreigners pull down Vancouver prices

Much-tightened strictures on foreigners pull down Vancouver prices

Much-tightened strictures on foreigners pull down Vancouver prices

Regulatory changes that have clamped down on foreign home buyers – a cohort often pinpointed as a major driver of the long-running Canadian real estate affordability issue – have led to a significant unintended side effect in Vancouver.

At the beginning of 2019, the city’s benchmark home price saw a 4.5% annual shrinkage (down to $1.02 million). This was the greatest year-over-year decrease since May 2013, according to the Real Estate Board of Greater Vancouver.

The market is also currently seeing 19.5 months of unsold inventory.

“Today’s market conditions are largely the result of the mortgage stress test that the federal government imposed at the beginning of last year,” REBGV president Phil Moore told Bloomberg.

Taxes aimed at foreign buyers have especially made themselves felt in the high-end segment of the market, the Board noted. West Vancouver has seen its prices drop by 14% year-over-year.

Read more: The cost of ownership in Vancouver is worsening – National Bank

“These homes in West Van were selling for C$12 million, C$13 million two years ago,” Royal LePage realtor Adil Dinani said. “Agents are asking me to throw them off for anything -- C$8 million, C$8.5 million, whatever it is.”

Dinani cautioned that this retreat of speculative investors and foreign buyers is threatening the market. “What local buyer has C$6 million, C$7 million to put towards a home?”

Despite these price declines, however, a recent analysis by the National Bank found that the market’s affordability is still deteriorating.

Weakening income growth is the main factor acting on the crisis, the study noted. The average monthly mortgage payment for a benchmark-price single-family home in the Vancouver CMA was approximately 101.5% of the region’s median household income as of Q4 2018 – a record high, having increased by 2.7% quarterly and 6.4% annually.

Condo affordability also dropped, with the payment for an average-priced unit in the Vancouver CMA at 49.2% of household income during the fourth quarter, increasing by 1.3% from Q3 2018 and 6.3% year-over-year.

4 Comments
  • Anonymous Coward 2019-02-06 11:08:11 AM
    How have those rules had an "unintentional" effect? Wasn't that exactly the effect people wanted? And why is this happening all over the world, including where there are no such restrictions in place?
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  • Realaturd 2019-02-06 4:16:04 PM
    The average vancouver home is losing $3000 per week in 'value'. Wait more = save more.
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  • 2019-02-06 10:54:24 PM
    But these properties were heavily speculated on in the first place and not actually worth all the millions. 🙄. Of course realtor spin "devalued". Lol. More like coming down to what the property is actually worth of 3 years of heavy speculation.
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