Just over a year ago, on August 2, 2016, the BC government听.
At the time, there was uproar. Most of the outrage was about the unfair way the policy had been introduced,听听who were already locked into a home purchase contract, but still had to pay up. (Some of them are still fighting to get their money back, and a听听is ever-so-slowly ongoing.)
And then there were the pundits鈥� predictions about how the market would react, ranging from doomsayers forecasting a major price correction to those who shrugged it off as a passing blip.
Now, I don鈥檛 know about you, but I find it fascinating to take a look back at such predictions to see who was right. So here goes.
There was certainly an immediate reaction to the tax 鈥� from all buyers, not just foreign nationals 鈥� in August last year.听听looked at the month鈥檚 plunging sales numbers, and cited fears from local mortgage broker Peter Kinch that this immediate reaction could be 鈥渕isinterpreted鈥� and that the local market could react further, thereby causing an 鈥渙ver-correction.鈥�
Although home sales and detached home prices did continue to cool through last fall, the rate of slowing eased considerably after that initial policy shock, prices recovered, and that 鈥渙ver-correction鈥� never occurred. Check out this graph of home sales and benchmark prices since March 2016鈥檚 all-time-high sales.
听
My favourite prediction from last year came from the chief economist of Central 1 Credit Union, Helmut Pastrick. Always a smart commentator, he told an Urban Development Institute panel event audience in September that despite the slowdown in sales,听听and be higher in a year鈥檚 time.
Pastrick said, 鈥淚 fully expect September [2016]鈥檚 sales to be down again, year-over-year, probably by 30 or 35 per cent compared with last September. The average price will probably fall again, relative to August, and this will play out over the next three to six months 鈥� it鈥檚 a temporary market disruption.
鈥淎fter the market has absorbed this new tax regime, we will begin to see other market fundamentals come into effect. Prices will then continue to rise, and they will be higher this time next year.鈥� The above graph shows how exactly right Pastrick was.
Also a panellist at that UDI lunch, Tsur Sommerville, associate professor at UBC鈥檚 Centre for Urban Economics and Real Estate, agreed with Pastrick and pointed out, 鈥淚n other markets where a foreign buyer tax was introduced, such as Hong Kong and Singapore, in both those markets, prices continued to rise.鈥�
Less accurate, however, was the typically bearish National Bank, which predicted that over the following year,听 overall, and detached home values would fall by double that amount. 鈥淲e think 麻豆传媒映画home prices will soon start correcting,鈥� the bank stated in October last year. 鈥淲e expect a decline over 12 months of 10 per cent overall and 20 per cent for detached homes.鈥�
The accuracy of the National Bank鈥檚 prediction depends on which month you begin that 12-month period. By the time they made that statement in October 2016, detached home prices had already dropped by 12 per cent since their peak in January that year, due to a slowdown that far pre-dated the foreign buyer tax. But one has to assume the National Bank meant that detached prices would drop by 20%听further听over the following 12 months, from the time of their October statement. And, although average home prices did see a larger decline than the composite benchmark price in the graph above, detached home average values fell only an additional 6 per cent between October 2016 and January 2017, before then rising again in the spring market. Average detached prices then declined again somewhat, between May and July this year, but are still higher than prices at the time of National Bank鈥檚 prediction. And the average sale prices of townhomes and condos have also increased in that time, not decreased.
And what of my own predictions? I wrote听听just after the introduction of the foreign buyer tax, and I鈥檓 gratified to see that I haven鈥檛 been embarrassed by my predictions that the levy would ultimately have little effect on the local housing market. I wasn鈥檛 expecting such an acute slowdown in sales to occur, as I had not anticipated the even-more-rapid decrease in the supply of available homes. But I think that the听听showing a considerable reduction in the number of overseas buyers entering our market, and yet the听听this year (and average prices, too), seems to me evidence of the failure of the tax to dampen demand or prices.
It remains to be seen how the new GreeNDP government will intervene in our housing market, and what the result will be. Get ready for a whole new round of predictions and outcomes.
This piece first appeared in our sister publication REW. See the original article . For more real estate news go to
