A new tax for foreigners buying property in Vancouver in Canada has resulted in sales plummeting and prices are also heading down.
However the British Columbia Government has announced that foreign buyers with work permits who live and work in the state will no longer need to pay the 15% extra tax introduced last year.
There were concerns that the tax was having too much of a negative effect on the housing market. In November 2016 there were just 204 sales to foreign buyers in the Vancouver metro area compared to 1,970 in the seven weeks before the new tax was introduced.
And the very latest figures show that in January sales overall were down by 40% compared to a year ago and down 11.1% month on month. January sales were 10.3% below the 10 year average for the month.
The new foreign buyer’s tax was aimed at cooling demand in a red hot market and improving affordability in in the city after prices soared 24% in one year. But it seems to have more of an effect than desired.
There was also concern from employers, many in the technology and advanced education sectors, about the impact of the tax on their ability to recruit workers to live and work in the province.
‘This was a necessary change but how it will unfold is still not known. The tax has had a big psychological impact on the market and this change may ease some of the uncertainty enabling buyers who contribute to the local economy to now enter the property market without facing extra costs,’ said Kevin Skipworth, managing director of Dexter Associates Realty in Vancouver.
If prices start to fall it will be the first decline in home values since 2012. The benchmark price for various housing types slipped last month to $896,000, down 3.7% since July, but still up 15.6% from January, 2016. The benchmark price is an industry representation of a typical property. Since last July, the benchmark price for detached houses sold in Greater Vancouver has dropped 6.6% to $1.47 million.