The Cost of Paradise
Fourteen months ago, the government of British Columbia imposed a 15% tax on foreign homebuyers in the Metro Vancouver area. The tax went into effect on Aug. 2, 2016, only nine days after it was announced.
In the first two weeks of that month, home purchases declined by a whopping 65.7% compared with the same period in the prior year. But it’s difficult to keep investors/buyers at bay when a) we’re talking about the warmest area in the country, and b) that country – Canada – is very stable, and c) real estate in Vancouver (and Toronto) continues to appreciate at a very attractive pace.
Oh, and lest we forget, the climate in Vancouver has been compared with that of Raleigh, NC, Portland, OR, and Amsterdam. Vancouver’s growing season, for example, averages 221 days, from March 29 until November 5; that’s 72 days longer than Toronto’s. Maximum temperature averages 72 degrees F., and minimum temperature is 44 degrees F.
That’s why Canada’s The Globe and Mail (June 2, 2017) had this to say: “While the market for detached homes cooled in the second half of 2016, condos and townhouses experienced a short lull before continuing on a tear, smashing former highs. The average price for condos sold in Greater Vancouver last month hit a record of $656,919, up 15.1% from a year earlier, and the average price for townhouses jumped 7.4% to a new high of $858,994.”
And what about that most coveted of real estate properties, the detached house?
The Globe and Mail explained what occurred only nine months after the imposition of that 15% tax: “The average price for detached houses sold in Greater Vancouver reached a record of $1,830,956 in May (2017), up 5% from the same month in 2016 and just surpassing the previous high of $1,826,541 in January 2016.”
In June, the political alliance in British Columbia of the New Democratic Party with the Greens has placed reining in housing prices high on its agenda. The Greens have already proposed raising the tax on foreign purchasers to 30%, and expanding it Province-wide.
There’s trouble in Paradise, as well as in the oil patch.
According to a Reuter’s article, “Canada’s oil sands sector (in Alberta) has become one of the biggest victims of the global oil price crash that began in 2014 when top OPEC producer Saudi Arabia flooded the market with cheap crude to drive out high cost competitors.
“This year alone, oil majors have sold over $22.5 billion of assets in Canada’s energy industry, and been lured south to invest in the higher returns of U.S. shale. A handful of remaining (smaller) firms are searching for a breakthrough that will cut the cost of pumping the tar-like oil from the country’s vast underground bitumen reservoirs and better compete with the booming shale industry in the United States.”
Good luck with that.