What Ontario Should Learn From BC’s Housing Debacle
British Columbia realtors report March sales were off almost 22 per cent from a year ago and blame the shortfall on a lack of new supply hitting the market.
Across the province, the British Columbia Real Estate Association said Thursday active listings in March dropped 18.1 per cent from a year ago to 25,020 but in spite of that decline, the average price of a home sold across the province was down 10.5 per cent during the period to $690,597.
“Consumer demand continues to normalize following blockbuster sales in 2016,” said Brendon Ogmundson, an economist with the group that represents 22,000 realtors across the province. “However, the supply of available for sales has not recovered and is still declining in many markets around the province.”
Ontario politicians continue to watch the British Columbia housing market, in particular Vancouver, closely, as they consider measures to cool the Greater Toronto Area resell market where March prices rose on average 33 per cent from a year ago.
Effective August, 2016 British Columbia imposed a 15 per cent additional property tax on foreign buyers — a measure many, including Doug Porter, the chief economist of the Bank of Montreal, have called for in Toronto.
Those opposed to the tax have talked about the detrimental impact it has had on the Vancouver market. Over the first three months of the year, Vancouver sales are down 37 per cent from the same period a year earlier.
On a province-wide basis, there has been $14 billion in sales activity through the first three months of the year, but that’s down from almost $21.6 billion a year earlier. The dollar volume in the Greater Vancouver market was $7.4 billion over the first quarter, down from $13.3 billion a year ago.
Prices in Greater Vancouver continue to fall and declined 9.3 per cent from a year ago to $991,690.
“Although the average price in B.C. was down year-over-year due to a shift in the composition of sales away from higher-priced homes in Greater Vancouver, home prices in most markets are being pushed higher due to severe supply constraints. This is particularly true for the Victoria region, which currently has just over one month of inventory for sale, as well as for the apartment and townhouse market in the Lower Mainland,” said the organization, in its release.
Realtors have suggested foreign buyers in the province have shifted their focus to Victoria and other parts of the province where the additional tax doesn’t apply, a worry Ontario politicians have about a tax in Toronto and how far it would extend beyond the metropolitan area.
The C.D. Howe Institute warned this week that Ontario should not follow B.C.’s lead and pointed out a tax that reduces home values will penalize people who have already purchased property.
“B.C. was not the first to impose a tax of this nature. In fact, Hong Kong, Singapore, and Australia have imposed similar taxes. Hong Kong’s identical 15 per cent foreign-buyer tax lowered transaction volumes by 35 per cent, while dampening housing price increases by a monthly pace of nearly one per cent one year after implementation. Similar effects were observed in Singapore’s housing market,” said the group in a published article.
C.D. Howe says its research shows the foreign-buyer tax has led to nearly 40 per cent fewer transactions than would have occurred without it and average prices that are 4.5 per cent lower.
The group claims the people who have really felt the sting of the provincial tax are homeowners who already purchased property and not foreign buyers.
“The B.C. government’s intent was to lower prices and stabilize the market, but the drop in prices and number of sales shows that locals looking to move feel the harm of the tax. The attention now turns to Toronto’s housing market,” said the group. “The government of Ontario should take a close look at the harm of Vancouver’s foreign buyer tax and not follow suit.”
Source: Gary Marr With The Financial Post