Investor: Don’t credit foreign sales tax for cooling market

Following two months of slagging sales in Canada’s once-busiest market, one professional is arguing the recently implemented foreign sales tax isn’t entirely to blame.

“Here’s my prediction of what’s happening: There is almost a perfect storm converging where you have foreign buyers taking a step back at the same time Vancouverites would typically go on vacation in August. So the market should have an ebb and flow in August anyway,” Peter Kinch, a Vancouver-based investor and mortgage broker, told Canadian Real Estate Wealth. “Which would be borne out by the September sales numbers. September sales numbers are in large part reflected in the activity that was happening in August. We local people go on holidays, so there is a slowdown normally.”

Foreign buyers in Vancouver were slapped with an extra 15% tax at the beginning of August, which had an immediate impact on home sales in the lower mainland.

Home sales dropped 26% year-over-year in August; that trend continued in September, with sales falling 32.6% year-over-year and 9.5% month-over-month.

And while foreigners wary of parking their cash in Vancouver real estate may be partly to blame, Kinch maintains that isn’t the full story.

“The year-over-year comparisons can get skewed and the problem is that will create a perception that the foreign buyers tax has an enormous impact when really that was a portion of people going on holidays,” he said, arguing the sales cycle will return to normal with a rebound in the spring of next year.

We’ll just have to wait and see.
 

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COMMENTS

  • by 2016-10-05 11:36:47 AM

    Slagging or sagging sales ?

  • by Brad 2016-10-05 12:17:55 PM

    I agree that the reduction in sale volume is a combination of reduced foreign buying and local buying... but your argument of reduction in year over year sales volume for August and September being caused by people vacationing in August of this year doesn't make sense (unless people didn't take vacations in 2015:) )... The same average percentage of our residents would have, of course, vacationed last year as well as this year.

  • by Cory O'Brien 2016-10-05 4:45:37 PM

    I agree. As a Tri-City Realtor, I could feel the market slowing in July, which was a nice reprieve, and I was able to get away quite a bit this summer. As well, many of my clients and colleagues . However, I have been involved in 6 multiple offers since the third week of August, with attached properties. I am finding it still very busy...just not as many people involved in the Multiples. I definitely don't think that the 15% Foreign Buyer Tax was the sole cause of the slowing market.

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