The numbers and the anecdotal evidence are clear: while Metro Vancouver’s housing market has been on a surprising tear during the COVID-19 pandemic – with sales up 73 per cent year over year as of February – the market for foreign buyers looking to enter the Lower Mainland has nearly vanished.
While local real estate industry representatives and urban development analysts agree that COVID travel restrictions have limited international interest in Vancouver-area homes, they disagree on whether the foreign-homebuyers market faces a longer-term correction.
According to municipal residential real estate data, there were five months out of 12 in 2019 in which there were more than 30 foreign-involved transactions that triggered the 20 per cent provincial foreign-buyers tax in Vancouver.
Since March 2020, that monthly number of transactions has not surpassed 15 – and failed to break single digits for six of 2020’s last 10 months, when monthly sales averaged nearly 2,000 homes a month.
“In March 2020, we had 24 foreign-involved transactions in the city of Vancouver. The next month, we went down to six,” said Andy Yan, director of the City Program at Simon Fraser University and one of the city’s leading urban-planning researchers.
Mike Stewart, who works with corporate rentals for out-of-town executives, said the pandemic “has really put the crimp on corporate rentals, because people are not travelling.”
Brian Higgins, founder of YVR4Sale, which has clients from the U.S., Europe and Asia, agreed that the real estate market boom is driven locally. But Higgins said foreign-buyer activity in Vancouver has lagged behind as far back as 2016, when former premier Christy Clark introduced the foreign buyers tax.
Property transfer data from the B.C. Ministry of Finance, showed that, as of mid-2018, foreign homebuyers in Metro Vancouver had fallen to just 1 per cent of transactions, down from 3 per cent a year earlier.
Higgins added that Vancouver’s empty home tax and the additional speculation tax implemented under the John Horgan BC NDP government also “scared a lot of people onto the sidelines.”
Yan, however, noted that even as the number of transactions fluctuated in the market since 2016, their overall value has stayed relatively stable in the $20 million-to-$60 million range every month. That indicates that the taxes have not dramatically shrunk the total dollar value of transactions – just the number of buyers who can afford the extra 20%.
“You have to remember, the nature of the foreign buyers tax wasn’t to prevent more buying,” Yan said. “It was just to capture value for the B.C. taxpayer. It’s essentially increasing the fee for [international buyers] to access the clubhouse. And you’ve also got to remember: It’s very specific to where and what. It’s a very particular type of property in specific regions that are moving up.”
He added that the B-20 mortgage rules introduced in 2018 that have been credited with spurring the current real estate boom have instead discouraged foreign buying, because the requirement for non-Canadians to get a mortgage makes the process more difficult.
What is also clear, observers say, is that international demand has not gone anywhere. Both Stewart and Higgins said they anticipate a surge in buying from abroad – mostly from Canadians living outside Canada in places like the United States, Hong Kong, Great Britain or Europe – as soon as vaccinations become widespread and travel restrictions are loosened.
Higgins said Ottawa’s plan to bring in as many as 400,000 immigrants annually in the next few years to boost the Canadian economy means the Metro Vancouver market will likely see another wave of cross-border buyers soon after the pandemic ends.
“If you are coming out of an unstable situation, people are willing to put a little more money into a more stable country. And Canada is a stable country … and Amazon coming in 2024. The tech coming out of that will be an immense economic boom for the city.”
But Yan urged caution. He noted that while the demand has not gone away abroad, how strong and consistent that foreign demand will be is hard to determine.
“Of course, the rest of the world has changed. Let’s face it, one of the main sources of growth had been coming in from China, and the Chinese rules – from the people I’ve talked to – have certainly tightened up. That brings a complication that we may not see the [previous high levels of] demand come back in.
“We don’t know what happens globally.… And a lot of things that drive foreign buyers happen outside of Canada. The world in 2021 is vastly different than what it was in 2016.”