The Financial Post reports that September saw a 33 percent drop in home sales from last year. Since April, there has been a 10 percent to 15 percent price correction. The key culprit is the 15 percent foreign buyer tax imposed by the mayor in July. Evidently, money outside Canada was bubbling Vancouver's market to the point that houses were appreciating at a thousand dollars a day.
One measure of the bubble is that, even with a 10 percent to 15 percent reduction, year-to-year housing prices are still up 29 percent. Now that foreign buyers are being discouraged, Canadian buyers and sellers are waiting to see what will happen, further slowing the market.
But enough about north of the border. What about us down here in and around Seattle?
So far, most of the reports are anecdotal. That's where the news starts. As we reported in September, searches from China about Seattle real estate were up over 140%. Understandably, real estate agencies are preparing and engaging in that market. Agents on the Eastside shared stories about an influx. It's probably not just happening in Bellevue.
Real estate is driven by supply and demand. The demand from buyers probably hasn't changed. If they see a change in their initial source of supply, they'll probably look for a new source. Seattle has already caught their attention. We have a lot in common with Vancouver, have a good economy, and are conveniently on the coast. That was true last month, too.
The new twist in supply again comes from Canada.
"On Monday, the federal government unveiled new rules to end a tax break on home sales by owners outside Canada and to tighten mortgage insurance eligibility requirements even for borrowers with large down payments."
Initially, buyers interested in Vancouver began to show interest in other large Canadian cities. It looks like Canada's federal government is taking lessons from Vancouver, which may have similar effects in other Canadian cities.
If not Canada, then where? Possibly here. When it was only Vancouver imposing restrictions, searches for Seattle were up 140 percent. When all of Canada sees at least some restrictions, the US becomes another source of supply worth investigating. Increased demand, no significant change in supply, prices rise on top of a rising market. We look forward to local data to add to the local anecdotes.
In the meantime, Vancouver may have inspired more than its own country. Last week, London's mayor, who is also concerned about affordable housing and real estate bubbles, announced that they, too, will be investigating the effects of foreign investment. If London takes action, yet another supply source will shrink.
It won't be a surprise if Seattle is looking more appealing. The price appreciation wouldn't be surprising, it would however, be startling.
· Vancouver’s $1,000-a-day home price escalation stutters [FinancialPost]
· Are Chinese buyers about to accelerate Seattle’s market? [CS]
· London mayor launches unprecedented inquiry into foreign property ownership [Guardian]