Foreign nationals buying residential real estate in Richmond are on a slow recovery after a 15 per cent tax on their purchases was introduced by the B.C. government in August.
Although Richmond remains the hottest detached home market for foreign investment, the decline in the sheer volume of such purchases has corresponded with one of the sharpest declines in detached home prices in November across Metro Vancouver, where the tax applies.
According to the Real Estate Board of Greater Vancouver (REBGV), benchmark prices for detached homes in Richmond declined 3.8 per cent in November and 5.5 per cent over the past three months. There were 65 sales overall, last month, but 192 in November, 2015.
Prior to Aug.1, foreigners were involved in 24.7 per cent of all transactions in Richmond. That dropped to 1.9 per cent in August, then 4.4 per cent in September and, finally, 6.7 per cent in October.
This, however, does not mean the decline in foreign purchases has caused a dip in prices, said Evan Siddall, president and CEO of the Canadian Mortgage and Housing Corporation, last week.
Siddall noted a slowdown in the market occurred before the tax was imposed. He stated foreign investment is merely one factor in Metro Vancouver’s affordable housing crisis.
Tom Davidoff, director of the UBC Centre for Urban Economic and Real Estate, however, places more emphasis on the role of foreign money. Davidoff noted the pre-tax downturn could have been caused by a weakened Chinese yuan and the Chinese government restricting money from leaving the country.
Siddall said low interest rates and low property taxes continue to exert pressure on domestic demand, while supply constraints remain an issue in the region.
While Davidoff argues the nearly 40 per cent spike in Richmond house prices over the past year is likely a result of foreign investment.
“To deny the role of foreign money is hard to believe,” said Davidoff, noting foreign demand appears to be shifting to neighbouring markets, such as Seattle and Victoria.
Siddall said the tax may not ultimately curb foreign speculation.
Overall, Vancouver’s housing prices are in a relative holding pattern. Richmond realtor Steve Saretsky said there are indicators of a buyer’s market emerging. REBGV noted demand, relative to supply, for detached homes is lower right now than demand for townhomes and apartments.