VANCOUVER – Home prices in Metro Vancouver’s once-surging real estate market are on the cusp of falling, housing experts say, as new figures show another month of plunging home sales in the region.
The Real Estate Board of Greater Vancouver published a report on Tuesday revealing a 32.6 per cent drop in September home sales compared with the same month last year. That follows a 26 per cent year-over-year decline in August and a dip of about 19 per cent the previous month.
“This looks like the top of the hump,” said Tom Davidoff, an economist at the University of British Columbia’s Sauder School of Business.
“Typically, before prices fall transaction volumes fall. It looks like that’s the direction in which we’re heading.”
Government officials have been scrambling in recent months to cool Vancouver’s sizzling real estate market, as surging prices continue to push home ownership further out of reach for the average resident.
Experts are divided on the reasons for the latest decline in sales.
Davidoff attributed the drop in large part to the provincial government’s 15 per cent tax on foreign buyers that came into effect in August.
Signalling that foreign demand will be significantly stifled dampens the incentive locals have to rush into the housing market, he said.
“Why would you (buy)?” Davidoff asked. “The only reason you’d do it is because you expect prices to grow. Well, if you think the foreign buyer’s gone, that’s off the table. So where’s the demand now?”
Davidoff predicts housing prices will sink at least 10 per cent over the coming year.
September was the second month the 15 per cent tax applied to non-residents purchasing property in the city.
The real estate board said there were 2,253 homes sold last month, a steep dip from the 3,345 home sales recorded in September 2015. The drop was felt most acutely among detached homes, where sales declined 47.6 per cent when compared to the same period last year.
Attached-home sales decreased 32.2 per cent while condo sales slipped 20.3 per cent.
Marc Pinsonneault, a senior economist at the National Bank of Canada, said the impact of the 15 per cent tax is overstated.
Home sales, when seasonally adjusted, have been dropping every month since February, long before the tax was introduced, he said.
“How can you say that there’s a large portion of that decline over a year ago that comes from the tax?” Pinsonneault said.
Like Davidoff, he predicted home prices will decline 10 per cent over the coming 12 months, adding that the slide will be felt most intensely at the higher end of the market, and less with condominiums and townhouses.
Andrey Pavlov, a business professor at Simon Fraser University in Vancouver, said the most interesting element of the real estate board’s report was that the number of sales dropped at the same time as the number of listings rose.
“This is the first time this has happened,” Pavlov said. “If this trend holds up we’re going to have increasing listings, decreasing sales and prices are going to start adjusting.”
In addition to B.C.’s foreign-buyers tax, Pavlov said the real estate market is being influenced by Vancouver’s proposed vacancy tax, as well as measures announced Monday by the federal government that will close loopholes for foreign buyers and tighten up mortgage-qualification rules.
“When you have that kind of situation people say, ‘Well, clearly the government is putting a cap on real estate and I’d be better off to wait a little and see how this thing resolves,”’ he said.
Last week, Swiss bank UBS released a report that said Vancouver had the greatest risk of a housing bubble when compared to 17 other high-priced large markets including London, New York and Sydney, Australia.