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The Multiple Listing Service data obtained by Postmedia News and anecdotal information from 10 real estate agents suggests that the region’s previously ultrahot market for single-family houses has frozen solid. Some luxury homeowners have already slashed their asking prices in order to quickly escape dangerous market conditions.
“The detached market has just fallen off,” said realtor Steve Saretsky. “It’s crazy. It’s actually scary. The week the tax was announced, it went dead across the board.”
And in an indication of just how powerful a force offshore buying had become in the Lower Mainland, MLS figures shows that the high-priced areas with the highest percentages of foreign buyers — according to government statistics and real estate agents — are now suffering the steepest drop-offs.
“The offshore tax just put on the brakes,” said realtor Nirma Desai, who sells homes in south Surrey. “The offshore buyers became a huge portion of the market. They were the driving force.”
Some examples of key markets for offshore buyers:
• Richmond. From Aug. 1 to 15 last year, Richmond had 89 detached sales. For the same period this month, 12 homes were sold.
• West Vancouver: Last year, 59 detached homes were sold during the first half of August. This year, nine.
• Vancouver’s west side: 72 detached homes were sold in the first half of August 2015, but only 15 this year.
And realtors said they expect the second half of August to be even slower, as foreign buyers rushed into the market in late July and the first day of August to beat the introduction of the 15-per-cent tax.
Meanwhile, with Metro Vancouver buyers now demanding discounts in a slowing market and offshore buyers either leaving or making lowball bids, some realtors say they are advising clients to cancel listings and come back in September, a month which usually has brisk sales.
“I’m telling all my clients, if we’re going to do anything, let’s come back in September,” Desai said. “I think the offshore buyers are being savvy right now, and playing a waiting game.”
Desai says she’s cautiously optimistic sales will bounce back in September after the shock of the new tax wears off.
Steve Saretsky says this optimistic view is held by many realtors.
“I might be the only one willing to accept that it might be a crash,” he said. “But I think a lot of realtors have the conception that it will pick back up in September.”
Saretsky says he worries that all the inventory pulled from the market in August “because nothing is selling” could pile onto September’s normal housing supply and skew the market even further in favour of buyers.
Prices rose in Metro Vancouver by 30 per cent in the past year. But Saretsky notes that in Tsawwassen, where his mother is a prominent realtor, veteran realtors say that surreal price rises of 48 per cent last year were driven mainly by buyers with links to Mainland China. Over the past 60 days, the only successful sellers in Tsawwassen were ones that dropped their prices sharply, Saretsky’s MLS data shows, sometimes by over $300,000.
He says that if September also experienced steep sales drops across Metro, more realtors would be convinced a serious correction was underway.
Brent Eilers, a veteran West Vancouver realtor, says that based on reported sales across Metro Vancouver he can already predict that the average prices of detached homes for August will be down between 15 to 25 per cent. Those figures roughly agree with the “real-time” average prices for August 2016 posted online by a national real estate firm, Zolo.
Eilers cautions though, that it is “a bit unfair” to judge the market on a 30-day period.
Regardless, choosing his words carefully, Eilers repeatedly said that he is advising his sellers — many of whom are downsizing baby boomers — to sell sooner, rather than risk being caught in a severe correction.
“The tax grossly expanded a shutdown in the market that was already happening,” he said.
Eilers draws on 35 years of market history and four different corrections to advise his clients of a range of possibilities.
In 1980, mortgage interest rates rose as high as 21 per cent, dropping prices from 40 to 60 per cent over six months in a gut-wrenching correction that took years to recover from, Eilers says. In the next three corrections, including 2009, prices dropped about 10 to 25 per cent and recovered within about 18 months to new highs.
The similarity in all cases, he says “is the urgency or fear drifts from the buyers to the sellers overnight, and prices always follow several months after the slowing in sales. That is why it’s so dangerous.”
Even though interest rates are unlikely to rise this time, Eilers fears that banks will not extend loans to local buyers with relatively low incomes if rich offshore buyers who have driven the market suddenly disappear due to the tax.
“The structure of the current market suggests it could go” to a 1980-type correction, Eilers says. “What I see suggests that this correction could be more significant than ones in the recent past.”
Danny Evans, a Langley-based realtor, says in some areas he has seen sales drop by 95 per cent in August and buyers are only making lowball bids.
In one case, a Vancouver property he listed had received offers of $2.3 million and $2.45 million. “The day after the tax was announced, the offer was for $1.7 million,” Evans said.
Evans said he is optimistic sales will bounce back in September because he believes offshore buyers will find ways around the new tax. He said he has already seen that happen in one sale that he feared could collapse after the tax.
“I’m sure there is a lot of people that will no longer go on title, but there still will be money coming in from China,” he said. “It all now will be under the table, and there will be side deals for the people that are going on the title (as owners).”
Meanwhile, lower-priced Metro Vancouver homes, including condos and townhouses, are still selling in a slowing market, realtors say.
Stephanie and Corey Goudriaan, a couple in their early 30s, say they were happy to sell their Surrey condo in early August at a slight profit.
Stephanie Goudriaan says the couple is living with her parents while they consider whether to dive back into the market for a townhouse, or rent while hoping for a market drop.
“We are confused to be honest,” she said. “It’s a crazy market. After being in for six years, it feels like to stay out is a gamble, and not to get back in is a gamble.”
UBC real estate economist Tsur Somerville says he believes that the offshore buyer tax slowed sales, but he would caution against reading too much into August statistics.
“It was a dramatic intervention,” Somerville said. “Part of that could be the foreign buyers (exiting the market) but more critically I think it is people saying ‘I don’t know where this is going, let me wait it out.’ So that would cause a drying up in market liquidity in August.”