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Published On: Wed, Apr 26th, 2017

Vancouver Real Estate Market Rebounds; AISA Realty Upbeat About Market’s Future

After a painful correction last year – laid at the door of Vancouver’s controversial foreign buyer tax – the city’s real estate market is showing signs of rebounding.

And the good news is that gains in sales volume are not accompanied by increases in price. For the first time in four years, according to a market report by the Royal LePage brokerage, home prices in Metro Vancouver dropped on a quarterly basis. Whether or not the trend will continue, however, is anyone’s guess.

“What we saw when the foreign buyer tax was implemented last year was many buyers stepping to the sidelines,” said Aaron Chen of AISA Real Estate Services. “Buyers naturally wanted to see how the market would react and whether real estate prices would come down after the tax.”

It was late last summer that British Columbia took steps to discourage the foreign investment that was considered a reason for Vancouver’s continually escalating real estate prices. Imposing a 15 percent surcharge on foreign buyers was hoped to be the cure to prices that are nearly double the national average of C$473,105.

It worked.

The surcharge went into effect beginning in August, and in that first month overseas buyers accounted for less than 1 percent of the metropolitan area’s C$6.5 billion residential real estate purchases, down from 17 percent in the previous seven weeks. Further, the Real Estate Board of Greater Vancouver reported that the average price of a detached property that month dipped to C$1.47 million, the lowest price since September 2015.

Vancouver photo/wikimedia commons

As the market decline continued, observers criticized the government’s “heavy handed” intervention. Although B.C. Premier Christy Clark touted the move as a win in moderating

housing prices, that still didn’t prevent the enactment of an adjustment to the surcharge last month that helped revive the market.  Under the change, international citizens who have work permits and pay taxes in B.C. are not subject to the surcharge. Anyone hit with it who later became a citizen can get a rebate.

Despite the adjustment to the tax, there’s still some uncertainty over the future of certain segments. The luxury market, for example, was hard-hit last year in the immediate aftermath of the measure – data from Sotheby’s International Realty showed that transactions in Vancouver area of at least C$1 million plummeted 65 percent in a mere 95 units in August.

“We’ve noticed over the past several months a definite pick-up in activity in the luxury side of the real estate market,” said AISA Real Estate Services’ Aaron Chen. “And activity is coming from both Canadian and international buyers.”

Indeed, Chen cautioned against the over-reaction to the role of foreign investors in keeping the fires lit under Vancouver’s hot housing market. He pointed to the luxury residential units of the city’s Trump International Hotel & Tower as example.

AISA Real Estate Services was brought in by the developer of the Trump International Hotel & Tower Vancouver to market the 30 percent of the units that were unsold in early 2015. Within eight months, 65 luxury residences were sold, and at prices that set a record for a project of this size in Canada. That average price per square foot of $2,306 brought the overall average price of the project up to $1,610 per square foot.

“What’s notable is not just the contrast to the other Trump project in Toronto, which has gone into receivership,” said Chen. “It’s that only 10 percent of the Tower buyers here had foreign passports.

“In the end, it’s important to realize what Vancouver has to offer as a city.  Vancouver has been ranked consistently as one of the safest cities to live in.  It has clean air and water and a world-class education, plus a limited land supply – these are the real fundamentals driving the city’s real estate market and these fundamentals are here to stay.”

Author: Tina Brandt

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