Since the foreign buyer tax was first introduced in Metro Vancouver in 2016, and then extended in 2018, the percentage of overseas buyers has plummeted, according to B.C. government figures. And since further market-cooling measures have been introduced, at both federal and provincial levels, there has been a decline in the benchmark detached home price of about 11 per cent.
So measures to cool the market have arguably “worked” – if slowing sales and reducing home prices was the goal. But has it now presented an opportunity for a fresh wave of overseas buyers to come in? Perhaps, if those buyers are really motivated. And the recent political unrest in Hong Kong could well be enough to create that momentum.
It seems that potential property buyers from Hong Kong (once again, for those who remember the early 1990s – are showing considerable interest in Canadian property. With widespread protests over the erosion of its autonomy by the Chinese government, and the resulting global trade tensions, it’s not surprising that Hong Kong residents are considering the safest harbours in which to extract and park their money.
According to a recent Bloomberg article, Metro Vancouver real estate agents are seeing a significant uptick in interest from Hong Kong buyers, with more Hong Kong than Chinese people at open houses. That’s quite the reversal from a few years ago.
The foreign buyer tax of 20 per cent is unlikely to be a major deterrent to a motivated overseas buyer. The 11 per cent price decline for a typical detached house – which is likely to be a steeper decrease for higher-priced luxury homes – takes care of much of that tax burden.
What’s more, the Hong Kong dollar is stronger against the Canadian dollar than it was a year ago, despite the political unrest. A $3 million home in Vancouver today would cost a Hong Kong buyer just under 18 million Hong Kong dollars, compared with 19.5 million a year ago. That’s a discount of 7.6 per cent. Not to mention the fact that the same $3 million home might have cost $3.8 million a year ago, which at currency rates of the time would be 24.5 million Hong Kong dollars. So the reduction to 18 million HK dollars is actually a 26 per cent discount – more than outweighing the foreign buyer tax.
All of which means that our region could seem a veritable bargain, especially for someone truly motivated to get their money out of Hong Kong.
Bloomberg’s article reads, “Vancouver, where housing prices have been in a slump for the past year, may be the first city to benefit from the upheaval in Hong Kong.”
Whether you see a fresh influx of overseas money into our property market as a “benefit” or not, I can’t help but suspect they might be right.