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Supply, not foreigners

The chief economist at the Canada Mortgage and Housing Corporation (CMHC), Bob Dugan, recently published a piece in Macleans called: why the foreign buyers tax isn’t making Vancouver more affordable.

Here’s an excerpt:

One year after the implementation of the foreign buyers tax, monthly sales to foreign investors now hover around 4 per cent of all sales. But our latest Housing Market Assessment, released in July, still shows a red flag for Vancouver—with particular concern given to overvaluation and price acceleration. Average prices in Vancouver have rebounded to where they were before the tax’s implementation. In between, there was a marked drop, but it appears to have been temporary. In short, Vancouver is largely right back to where it was before the tax.

He goes on to argue that while there are many factors affecting home prices, “supply is by far the chief factor.” This, of course, is a refrain you hear from everyone in the real estate business, so I’m not going to belabor the point.

But I would like to point out some of the percentages. 

Before the tax, foreign sales in Vancouver (to buyers who do not have a permanent address in Canada) were thought to sit at roughly 10%. Immediately following the tax, when everyone was trying to assess the impact, this dropped to ~0.9%. And now it’s back up to somewhere around 4%, according to the article.

Arguably, there has been a slight reduction. Though who knows how accurate these percentages are. There is now a strong incentive to hide foreignness. 

Regardless, CMHC doesn’t believe it’s working.

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