The drop in home prices in Vancouver does not come as a surprise to many as most of the money in the housing market has been spent in the hot real estate market last year. Home prices reached record high last year and this has resulted to a significant drop in home sales and also prices as buyers have now moved to other reasonable markets. Home prices in January were down 18.9% with the average home prices at $878,242 in Vancouver whereas the average home price last year was at $1.038M.
But such a drop in home prices is quite expected after a hot market goes through a housing correction. Furthermore, the 15% tax imposed on foreign buyers has also limited the involvement of such buyers in the Vancouver real estate market. According to figures from the Canadian Real Estate Association, there are two major factors behind the significant drop in home prices. Home owners making low asking prices to ignite bidding wars and a sharp drop in the supply of luxury homes bringing about a change in purchasing trend have been the main reasons behind the large drop.
For Vancouver market spectators, buyers are getting less interested in single-family homes which led to a massive drop in the sales of these types of homes. Despite the fact that home prices in Vancouver had already begun to cool down before the government intervened with a 15% tax on foreign buyers, the tax however had great effects of bringing down home prices. Home sales in the city drop 39.7% from the numbers recorded last year while foreign currencies in the market was also down 51.1%. Dominion, British Columbia mortgage lender has notified that the new capital control law in China will also affect the Vancouver market as Chinese investors would be restricted on the amount of money they can take out of China.
Chinese investors requesting to removes funds out of Chinese are need to declared that the money will not be used for real estate purposes or they will face the law. Although the new regulations will not all together prevent Chinese investors from participating in the housing market, it will however affect first-time buyers who have restricted funds. But while Vancouver is facing a housing decline, Toronto is heading towards a housing bubble as home prices continue to soar out of control and it is also affecting neighboring markets.