
Vancouver house prices are falling - prostoalex
https://qz.com/903194/vancouver-house-prices-are-falling-as-it-gets-its-real-estate-bubble-under-control/
======
animex
In addition, the article fails to mention the Empty Home tax implemented by
the city. Homes that sit empty (for speculation or other reasons) are taxed 1%
per year. This was done to increase the vacancy rate and encourage owners to
put all this property sitting idle back onto the market. AND: Collected Empty
Home Tax will be reinvested into affordable housing initiatives.

~~~
Kluny
Wildly insufficient. As a local, I'd vote that foreigners shouldn't be allowed
to buy property here at all - not residential, not speculative, not vacation
homes, nothing. 1% tax is slightly better than nothing, I guess.

~~~
jimmywanger
> As a local, I'd vote that foreigners shouldn't be allowed to buy property
> here at all

Define "local" and "foreigner". Does local mean you grew up in vancouver, or
moved there a while ago, or your family spent three generations there already?

In addition, define foreigner. Anywhere else in British Columbia considered
"foreign"? What about from Ottowa?

If you mean that you want to punish behaviour, such as buying houses and
properties you don't live in or use, that's one thing. Discrimination based on
locality sounds an awful lot like Jim Crow laws.

~~~
jcoffland
You had me right up to _Jim Crow laws_. That is a bit hyperbolic and an
inappropriate comparison, IMO.

~~~
jimmywanger
"Foreign real estate investor" in Vancouver is a thinly veiled euphemism for
"Chinese and Russian money."

When you're passing a law that disproportionately affects certain ethnic
groups, that particular comparison is apt.

~~~
toomuchtodo
Most of the Russian and Chinese money is being laundered out of their
respective countries.

Your ethnicity isn't being discrimated against, just your country's economics
circumstances. No reason to bring the SJWing into an economic argument.

~~~
jimmywanger
>Your ethnicity isn't being discrimated against, just your country's economics
circumstances.

Restricting people, no matter their ethnicities, based on their country's
circumstances is generally frowned upon. Especially when it only affects
citizens of a few countries. "Well, this law only applies to <action> Too bad
only people from these countries perform these <actions>"

Besides, your claim that the money is being laundered is highly speculative
and unproven. That's the definition of painting with a wide brush - because
most money is suspect, you cut off access to all of it?

~~~
toomuchtodo
Both local governments and popular opinion in those regions differ from your
opinion, although you are still entitled to that opinion.

Local residents and voters have the right to keep others out if their laws
allow for it. Outsiders/non-citizens don't get a vote.

------
milesf
This Bloomberg article explains what has been happening here:
[https://www.bloomberg.com/features/2016-vancouver-real-
estat...](https://www.bloomberg.com/features/2016-vancouver-real-estate-
market/)

Vancouver is located at the most western point of the Fraser Valley which is
locked in by a mountain range to the North and the US border to the south. I
live in Chilliwack, BC at east end of the Valley. I bought my home out here in
the "cheap" part of the FV in 2015 for $375,000 and two years later it's
assessed at $570,000.

The joke here is "they pay you in mountains and rivers". Wages are nowhere
close enough for the average family to live here, so many are having to leave.
But because Canada has some pretty epic winters in most of the country, and
Vancouver has the mildest weather and climate (read: it rains a lot here) many
baby boomer Canadians move here to avoid the winters the rest of the country
endures 3 - 4 months out of the year.

If you're a US citizen thinking about leaving the US and are considering
moving to Vancouver, do your research first. Talk to other Vancouverites and
check your assumptions before committing to buy property. I'd recommend
renting here for a couple of years to see if it's for you, and also because
the market will hopefully correct and you'll get a better price on a home.

------
smsm42
I'm not sure I'm getting this right - they got 3.7% drop after 250% raise in
10 years and they consider the problem being fixed and everybody should come
and look how cool they are? Something is missing here. OK, let's say they
manage to get the local market get lethargic - nobody sells because prices are
too low and selling means realizing huge losses, nobody buys because there's
nothing to buy. How this is "bringing it under control"? It's like shooting
your computer and saying "here, I debugged it! It's no longer crashing!" It's
no longer working either...

~~~
akhatri_aus
You do know that over 10 years that is an annualised 9.6%, a 3.7% drop in a
year is a big deal. What do you want, anarchy?

~~~
smsm42
I want to understand what is the great achievement this article is touting.

------
refurb
Imagine the Canadians who bought in the last 6 months. They probably purchased
thinking it was a great investment and if they didn't buy now they'd never be
able to afford a home in Vancouver.

And the shocking thing is just how big the losses can be when homes cost >$1M.
If you buy a $200K home and the market drops 10%, it's a $20K loss of your
down payment. A lot of money, but something manageable for most people.

If you bought a $1.5M home and the price dropped 10%, that's a $150K hit to
your pocket book. And 10% is a small drop in an overheated market like
Vancouver. It wouldn't surprise me to see a drop closer to 20-30%. That's a
$300K to $450K loss for those home owners.

~~~
k-mcgrady
>> They probably purchased thinking it was a great investment

You would think by now people would have learnt their lesson and stopped
thinking of housing as a 'great investment'.

~~~
zitterbewegung
For most people your house is one of your largest investments .

~~~
WalterBright
Once you factor in mortgage interest payments, taxes, maintenance, inflation,
real estate commissions, your time, and the time it sits vacant while you try
to sell it, it's usually a lousy investment.

Much better off investing in the S&P 500.

~~~
smsm42
You can't live in S&P 500 ;)

Also, when you factor this in - the landlord also knows how to factor those
in. So rental prices won't be far behind. There are a lot of factors in
renting vs. owning, but it's not clear-cut either side - you need to always
look to specific local prices.

~~~
WalterBright
> You can't live in S&P 500

Getting a place to live is quite different from getting one as an investment.

> the landlord also knows how to factor those in

Rents are determined by supply & demand. They are not determined by whatever
the landlord pleases to charge any more than whatever the renter pleases to
pay.

~~~
smsm42
> Getting a place to live is quite different from getting one as an
> investment.

Not really. You need a place to live anyway, so why not get one that can also
would appreciate in value? Alternatively, getting one that would depreciate
can be financially ruinous. So investment consideration is always there, even
if they might not be always the primary one.

> Rents are determined by supply & demand.

That's a platitude. But you are thinking of "supply and demand" to narrowly -
nobody would purchase a rental property that brings in less money than it
takes out, whatever demand is around. There's a price floor for rental price,
and that's how much it costs to the owner to get and maintain the property.
Short-term, the price can drop below it since selling house takes time, and
the market may be not good. Long-term, nobody would keep such asset. People
don't do it for fun, they do it for money. If selling is more profitable,
they'd do that.

------
redthrowaway
It's fascinating how effective the foreign ownership tax has been. It's only
15%, but it essentially halted the Vancouver property bubble in its tracks,
and is now deflating it.

I'll admit to being one of those who thought Vancouver's real estate prices
were due to an unwillingness to build. I was wrong. It was always just Chinese
money fleeing uncertainty and trying to find a safe place to land.

~~~
F_J_H
Can't be too quick to attribute the "halt" as there have also been changes in
currency control policies in China that came into effect in the new year.
There likely are a few different contributing factors.

~~~
stuckagain
The article addresses this. Actions taken by china affect all cities but only
Vancouver in recovering from bubble pricing. Other Canadian cities continue to
suffer rising prices. Therefore we may conclude that the cause is specific to
Vancouver.

------
zhuzhuor
IMO, the timing also coincides with Chinese government's several actions of
tightening regulations for foreign exchanges/purchases. So it may be a
combination of multiple factors (not sure which one is more significant)

See
[https://www.ft.com/content/87d8a7e8-cfe8-11e6-b06b-680c49b4b...](https://www.ft.com/content/87d8a7e8-cfe8-11e6-b06b-680c49b4b4c0)

~~~
jsmeaton
The foreign tax appears to be more significant due to other cities without the
tax not seeing prices drop.

~~~
refurb
You have to remember that Vancouver was _the_ hottest housing market in
Canada. Toronto is #2, but prices there are maybe 60-80% of those in
Vancouver. And Toronto is a massive city with a ton of high paying jobs.
Vancouver not so much.

As I stated in another reply, I have no doubt the foreigner tax had an impact.
But even without it, the Vancouver market was poised for a downturn.

------
guylepage3
I don't know where these guys got their stats but an average-priced detached
home throughout Greater Vancouver costs $1,470,265.

[http://www.huffingtonpost.ca/2016/09/02/vancouver-
detached-h...](http://www.huffingtonpost.ca/2016/09/02/vancouver-detached-
home-price-crash-housing_n_11837936.html)

~~~
refurb
I assume their number includes condos as well.

------
dleslie
I expect prices to drop up to 15% and then to recover. Such trends to happen
when prices are elastic, profits are high, and a new tax is enforced.

I'm more interested in the effects of the new monetary rules/enforcement that
China has imposed on its citizens. Still, I remain steadfastly skeptical that
the sky will fall.

~~~
seanmcdirmid
New rules were not technically imposed, just a tougher enforcement of older
rules. Anyways, the next moves by he Chinese gov should happen post CNY,
they've already ratcheted up interest rates a bit in a surprise move, they'll
probably make other moves in the next couple of weeks after people start
coming back to work.

------
elmalto
Christy Clark, the premier of BC, is considering getting rid of the 15%
foreign buyers tax already and has proposed or implemented initiatives to
bolster the RE market again. She and the mayor of Vancouver are said to have
great ties to the RE industry. She needs to address the problem (elections are
coming up) but doesn't want to anger her biggest donors (elections are coming
up). One of the things she just did is implement interest free loans for 5
years for new home owners

~~~
wattt
The BC Liberal goverment has been in power too long, but people really like to
play Real Estate Casino so the legacy lives on for now.

------
EternalData
I wonder if anybody has built a system to correlate Chinese policy actions
with economic effects elsewhere. I rudely became aware of just how much
Chinese capital controls mattered in cryptocurrencies when BTC took that mini-
dive. I'm sure there's some bank out there that's run the numbers -- it's
fascinating how many variables might hang on what is essentially a black box.

~~~
elastic_church
> I rudely became aware of just how much Chinese capital controls mattered in
> cryptocurrencies when BTC took that mini-dive.

except they don't, really.

[http://imgur.com/a/KDwtE](http://imgur.com/a/KDwtE)

------
apo
> So how did Vancouver tame its roaring housing market?

Tamed? The article makes it sound like over a decade of faster-than-inflation
price appreciation has been wiped clean with a one year decline of 3.7% and
cooling sales.

The real estate market moves in very long cycles due in part to the difficulty
of trading in an out of it. Believe what you want, but I suspect now is not
the time to dive into the Vancouver real estate market.

Also, no mention of China and the strong desire of many citizens to move their
money out of the country and into offshore assets like Vancouver real estate:

[http://www.huffingtonpost.ca/stephen-punwasi/chinese-
buyers-...](http://www.huffingtonpost.ca/stephen-punwasi/chinese-buyers-
vancouver-real-estate_b_14584566.html)

------
jonmc12
Local municipalities could easily take more protectionist measures like this
to preserve basic needs of local citizens. It seems very reasonable and
feasible to tax money coming from outside of the municipality so that housing
prices (or food prices, etc) don't inflate faster than the growth of the local
economy.

I'm thinking of dynamics where geographical wealth mismatches could affect
prices. A couple examples I've been exposed to:

    
    
      - Chinese investment in Bay Area residences
      - Transient Bay Area tech workers renting in Mission / SOMA
      - Residences being turned into vacation rentals in SF
      - Houston oil money buying residences in Colorado communities
      - NYC, LA, SF money flowing into Austin, both travel and investment
      - Vacation spending and mainland investment increasing the cost of residences in Hawaii
    

.. obviously many more examples could be cited. You could probably throttle
taxes on purchases from any outsiders - foreign buyers, vacationers, business
travelers to maintain a balance for residential property value growth.

The counter-side to this is that the wealthiest property owners (local and
foreign) benefit from the free inflow of capital. These people may be more
influential constituents to municipality leaders than people who would be
negatively affected by rising housing prices.

~~~
stuckagain
In what way are Bay Area tech workers "transient"?

~~~
dmichulke
Everything is transient. ("If something cannot go on forever, it'll eventually
have to stop.")

But I'm pretty sure that's not what GP was referring too ;)

~~~
stuckagain
Indeed. I would like to know how a tech worker is more transient than a
banker, bus driver, welder, poet, lawyer, etc.

------
bub_davos
This makes a lot of sense to me. I would like to see this implemented
elsewhere.

I live in the Bay Area, and I'm trying to buy a house with my fiancé and we
are really struggling to find anything affordable. I'm a software developer
and she is a school teacher.

~~~
mjmahone17
The Bay is more driven from internal consumption than Vancouver, though.
Vancouver had the problem of foreign owners buying up a significant percent
and leaving those homes empty. A tax on foreign owners won't have anything
close to the same effect in SF: SF's prices are driven by salaries and wealthy
residents much more than Vancouver's was.

~~~
seanmcdirmid
This. The bay is much more driven by google and Facebook millionaires while
Vancouver's bubble is/was almost completely driven by Chinese speculation. LA
is probably more exposed to a pop in Chinese speculation than the Bay Area is.

~~~
closeparen
The Bay is driven by vast numbers of Google and Facebook millionaire
_hopefuls_ , who are willing to pay 60% and more of their salaries for single
rooms in dilipidated apartments shared with strangers, and to endure
uncomfortable hour-plus commutes, in pursuit of their dreams.

High competitiveness among the few thousand who actually got rich would not
fall on the middle and working class so heavily.

A huge number of people willing to pay most of their upper-middle-class
salaries for a standard of living we would call poverty in any other region,
on the other hand, makes even poverty-style living too expensive for the Bay
Area's actual poor.

~~~
refurb
Agreed. How many people have been made millionaires through tech companies?
10,000? 20,000? Even 50,000?

There are 7 million people who live in the greater Bay area and they live in
~2.5M owner-occupied housing units. I can't see tech millionaires making
_that_ much of a an impact on housing prices. Sure, they could push prices up
by 10-20%, but SF housing prices have pretty much doubled since the great
recession.

I think it's the "now or never" mentality of home buyers. they think that
prices will only ever go up, so if they don't buy now (even if it means
overextending themselves) they'll never have a home. I'm sure a lot of people
thought the same thing before the housing crash of 2007.

~~~
bagels
Prices are set on the margins.

Sales volume in the bay area are low for a variety of reasons (Prop 13, not
enough new construction).

It doesn't take many people with high salaries when there is low inventory to
push prices up.

If many more houses were for sale, the prices would plummet due to lack of
buyers able to pay the current prices.

------
shostack
How comparable do people think their market is to the Bay Area? Would we
expect to see something similar if Trump did something similar (not out of the
realm of possibility at this point if it would give him a victory)? Or are the
job markets and situation with Prop 13 too different such there would still be
more demand than supply?

~~~
ctrl_freak
Vancouver's market isn't really comparable to the Bay Area. They have actually
been building quite a lot of new housing, and have been for some years.
Vancouver's real estate boom was mostly caused by foreign buyers (Chinese)
using it as an investment vehicle and a place to park their money. This is a
reason why Vancouver is among the top 2 or 3 most unaffordable cities, because
the median wage (~60k CAD) there doesn't support owning a family home, which
could easily be over a million CAD.

I doubt a foreign buyer tax would have much of an effect on the Bay Area,
since much of it is driven by internal demand and high salaries. On the other
hand, places like Sydney, Auckland, etc. have similar problems with foreign
buyers and could probably benefit.

~~~
refurb
_Vancouver 's real estate boom was mostly caused by foreign buyers (Chinese)
using it as an investment vehicle and a place to park their money._

Although foreign buyers do have an impact on the Vancouver housing market, I
think people really overestimate the effect it has.

After lots of discussion about hoards of Chinese buyers, the BC gov't started
tracking purchases. It peaked at 13% just before the tax (and most of that was
concentrated it the top of the price range).[1] Also, that definition of
foreigner is just someone without Canadian citizen or permanent residency. If
you live and work in Canada and are on a work visa, then you would still count
as a foreigner (which I don't think is fair).

That means only 1 out of 8 homes were bought by a foreigner and 7 out of 8
were purchases by resident Canadians.

What people seem to ignore is the absolutely shocking way that Canadians are
overextending themselves when it comes to real estate. It's a "now or never"
mentality and mortgage products like the ones that brought down the US economy
are becoming more and more common in Canada.

The foreigner tax is likely the straw that broke the camel's back when it came
to the Vancouver real estate market. Even without the tax the market was about
to turn.

[1][http://www.theglobeandmail.com/real-
estate/vancouver/foreign...](http://www.theglobeandmail.com/real-
estate/vancouver/foreign-buyers-13-per-cent-of-vancouver-region-real-estate-
sales-since-tax/article32572605/)

~~~
mistermann
> After lots of discussion about hoards of Chinese buyers, the BC gov't
> started tracking purchases. It peaked at 13% just before the tax (and most
> of that was concentrated it the top of the price range).[1] Also, that
> definition of foreigner is just someone without Canadian citizen or
> permanent residency.

You can still purchase permanent residence status with cold hard cash in
Quebec. A lot of Canadian "citizens" / "permanent residents" are nothing of
the kind, they are citizens of convenience. The passport and house is for
getting out of Dodge when the sh _t hits the fan.

Similarly, a lot of multi-million dollar houses are owned by Chinese students.

I'd feel very comfortable betting the _truly* foreign percentages is far, far
higher than the government is telling us. It took high levels of public
outrage before the government finally released a subset of the statistics, if
they were really now interested in telling the truth, they'd publish all the
metadata available for citizens to examine.

------
bawana
I call b#)(sh!t
[http://creastats.crea.ca/natl/index.html](http://creastats.crea.ca/natl/index.html)

Wishful thinking. Wealthy asians are still buying up everything.

~~~
msie
Wrong. The majority of purchasers are Canadian.

------
kennywinker
Condo prices in Vancouver, however, are on the upswing.

~~~
elchief
If by "upswing" you mean -5% for Vancouver west side over 6 months, then yes

[http://www.rebgv.org/sites/default/files/1.%20REBGV%20Stats%...](http://www.rebgv.org/sites/default/files/1.%20REBGV%20Stats%20Pkg%20January%202017.pdf)

~~~
kennywinker
My source would be my friend who is looking for a condo right now and their
experience has been that everything is being snapped off the market in days
for above asking.

------
gorkemyurt
how much are the property taxes in vancouver? I know in San Francisco its
around 1.15%. A 1M condo pays, 15k in property taxes a year. So vancouver just
increased this 15k by 2.25k and made it 17.25k? This seems negligible.. A 20%
increase in business class plane tickets from China would have a bigger effect
than this..

~~~
ansy
You misunderstand. This is a 15% premium on the entire purchase price. So for
a $2M home the tax would be $300k [1].

[1] [http://www.theglobeandmail.com/news/british-columbia/bc-
to-t...](http://www.theglobeandmail.com/news/british-columbia/bc-to-target-
foreign-real-estate-buyers-with-new-tax/article31096550/)

~~~
FireBeyond
I'm surprised that this has a material effect. I can't imagine that someone
who is willing to buy a $2M home not to live but to park money from overseas
is somehow not willing to pay $2.3M.

~~~
lawnchair_larry
I suspect it's a sign that they're a lot more leveraged than one might expect.
These people are not paying cash as long as money is near-free. They'd be
total fools to pay 100% of 1 house instead of 20% on 5 houses. So consider a
conventional mortgage that typically requires 20% down and you get it back
when you sell, plus a profit. With these rules, they now have to pay 20%+15%
to hold it, and they lose the latter portion to the government, plus
significantly higher tax annually.

I'd guess they're good enough at this game that they're even more leveraged
than the 20% conventional downpayment requirement and probably using the
(bubble inflated) equity to print new money out of thin air and get another
property.

I have no idea what's actually going on but this is how I've seen people
speculate on real estate in other markets and seems like the obvious thing to
do. I would even guess that there are ways of borrowing against money that is
still in China, which subverts their restrictions on moving money.

I also predict that this hiccup will be invisible within 6 months, for two
reasons.

1\. Nobody goes shopping for houses in December and January because it's cold
and there is Christmas/Lunar New Year etc, especially with the storms this
year.

2\. These restrictions are going to have loopholes and a market this big has
an implicit bounty on finding them. They'll figure out how to get Canadians to
hold the title to dodge the 15% foreign tax and they'll sign rental agreements
with their lawyers kids/pets and say it's officialy rented or whatever else
they need to do.

------
arjie
If I knew a trusted local, could they buy the property for me and then give me
a leasehold without incurring the tax?

~~~
erikpukinskis
Sure. You might be able to get out of the tax just by living in the house. The
law is just meant to be for people who are buying property as an investment
with no intention of living in the city.

~~~
zapdrive
Incorrect. You need to be a Canadian citizen, or a Permanent Resident, or have
a valid work visa to avoid the tax.

~~~
lawnchair_larry
Those are trivial to buy in most countries by "investing" in a business.
Probably even a business that buys and sells property.

~~~
mistermann
You can buy PR in Quebec, the predominantly French speaking province that has
a parallel government as they threaten to seperate every so often when they
don't get what they want.

------
facepalm
I have to chuckle at the thought of Trump introducing such a tax on foreign
house buyers. Imagine the outrage!

~~~
sanderjd
Well sure, that would pretty annoying, this sort of thing shouldn't even be
the federal government's job, let alone the President's. Note that this was
done by the government of BC, not Justin Trudeau. Which makes a lot more
sense.

~~~
edblarney
No, if the laws concerning ownership are based on citizenship, then it should
be done at the governmental level that manages citizenship, i.e. federal.

A 'national 15% tax' would have been much better.

Buyers from Van have shifted to Toronto. Which kind of defats the point - one
city passing on their disease to another.

Globalization is having some crazy effects on the entire world, and we need
some new laws.

A 15% tax on all foreign buyers on all homes in the world would be appropriate
- these are not 'stocks' or other assets - these are the homes that people
live in, and they are forced to gamble with their entire savings and future
savings due to shifting economic tides that they don't have the capital base
to deal with.

When shifting economic tides disrupt markets - the big winners are those who
have enough capital to withstand the storm - they come in and pick up the
pieces. Much like farmers during the great depression forced to sell their
land cheap to big banks.

~~~
TillE
Residency, not citizenship. Huge difference.

~~~
edblarney
Both residency and citizenship are controlled at the Federal level. (Except
Quebec :).

Also, I agree that there should be a difference, and that should be reflected
in the tax as well.

Non local residents 15% tax, resident, non citizens 5% tax, citizens 0% tax.
For every regime.

~~~
nojvek
This would deter a lot of high skilled immigrants coming into Canada. Waiting
6 years to buy a house is crazy. They'd move elsewhere. If you have a
permanent residency, it should not incur a tax.

------
TheRealPomax
As someone from Vancouver: ...hahahahahaha oh wait you were serious. Let me
laugh even louder.

House price inflation hasn't gone down in the slightest, especially not if you
consider the greater vancouver area, which is where everyone's been driven off
to, and consequently has become a metric that has to be considered when
talking about "Vancouver" house prices. Those people are now also getting
driven out of the GVA because the price increase over the last five years
despite being "neighbouring city" was in the order of ~4%, ~4%, ~4%, ~4%, and
then suddenly thanks to Vancouver proper, 30+%

------
KKKKkkkk1
The tech industry is highly cyclical. There's been a crash in 1999, and
there's been another one in 2007 (along with the rest of the economy). There's
no reason why it can't happen again. I'm sure that Bay Area housing prices are
a good proxy for the state of the industry. If you're a techie and you don't
have a way to stick it out through the next downturn, don't buy a house here.

~~~
johndoez
There was no tech crash in 2007.

