Foreign investors are finally reaching a relief point as the Greater Vancouver market faces a drop in prices. Foreign investors in 2016 received a 15% tax from the provincial government overnight, and it became very difficult for them to regain the 15% from sales, meaning that they would have to hold on to their properties for several years before it could appreciate enough to cover the tax and sales expenses.
In the government’s efforts to cut down on housing prices, the tax was a positive measure as it made housing a poor investment for foreign investors. And although some critics claim that foreign investors have very little influences on market prices, the fact remains that they in some way play a role.
Real estate in Richmond attracts the highest number of foreign investors in terms of detached homes and as Vancouver faces a drop in prices, Richmond has also seen a sharp decline in purchases.
Taking a look at the records from the Real Estate Board of Greater Vancouver, the standard price for a detached home in Richmond dropped by 3.8% in November and 5.5% in the previous months, whilst the sales of detached homes was only 65 this year compared to that of 2015 which was 192.
Before the tax was initiated, foreign investors were responsible for 24.7% of business dealings in Richmond but this figure dropped after the tax was implemented in August with a drop of 1.95 in August, 4.4% in September and 6.7% in October.
But according to Evan Siddall, CEO of the Canadian Mortgage and Housing Corporation, foreign buyers were not the only ones responsible for the drop in sales as records shows that there was already an existing drop in the market before the tax was introduced.
Differing from this statement, Tom Davidoff, director of the UBC Center for Urban Economic and Real Estate emphasized the relevance of international currency to Canada. He went on to explain that the restriction of the Chinese government on currency leaving its country, was a key factor responsible for the market drop.
He added that almost 40% of the increase in Richmond house prices came for foreign investors.
But for Siddall, he believes that the low interest rates, low property taxes and low level of supply are just some of the leading factors responsible for the drop and that the tax on foreign investors will have very little effects.