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Vancouver dominated the world with an annual increase of 36.4% from June 2015 to June 2016, making it the city with the fastest rise in house prices, according to the global luxury index released by Knight Frank, a British real estate service. This was followed by Shanghai (22.5%), Cape Town (16.1%), Toronto (12.6%), Melbourne (11%) and Sydney (10.2%).
However, the rapid growth of house prices in the future may not be sustainable. The Canadian government of British Columbia (hereinafter referred to as BC) announced in July that it would impose an additional 15 per cent property transfer tax on foreign buyers of homes in the Greater Vancouver area from August 2.
As soon as the news came out, house prices in Vancouver plunged 20.7% within a month, and trading volume also fell sharply. From August 1 to 14, only three homes were sold in western Vancouver, compared with 52 in the same period last year, down 94% from a year earlier.
The Canadian house price index released on August 12th showed that house prices across the country rose 2% in July compared with June, with the most obvious increase still in the four metropolitan areas, with Victoria leading the way with 3.8% increase. House prices rose 3.1% in Toronto, 2.3% in Vancouver and 2.4% in Hamilton.
Among them, house prices in Vancouver rose for the 18th consecutive month in July, rising 2.3% month-on-month in July.
In the real estate market report of 37 major cities around the world released by Knight Frank in the second quarter of this year, Vancouver led other cities with an annual growth rate of 36.4%, making it the city with the fastest rise in house prices between June 2015 and June 2016.
Knight Frank Research senior analyst pointed out that limited supply has become the main reason for the sharp rise in house prices in the high-end housing market in Vancouver. Supply is now at a 25-year low, while demand has been rising, putting pressure on rising house prices. Moreover, low interest rates have reduced borrowing costs and exacerbated house price growth.
Against the backdrop of soaring house prices, the local government believes that the Vancouver property market has reached an irrational situation.
On July 25th, BC province announced that it would levy an additional 15 per cent housing transfer tax on overseas real estate investors from August 2nd.
As soon as the news came out, the volume and price of the Vancouver property market fell. The reporter looked up the MLS transaction data and found that since the new tax on foreign buyers was announced in BC province, sales of independent houses have declined month-on-month. In Richmond, for example, only three detached houses were sold in the area between July 25 and 31, compared with 12 on July 18-24 before the new tax was announced, and 25 the week before. In addition, in Bennabi, only three self-contained houses were sold during the day on July 25, while seven houses were sold on July 18, and 20 houses were sold the week before.
Due to the rich educational resources in the western part of Vancouver, the “school district rooms” here are also favored by the Chinese, which once appeared the phenomenon of Chinese buying houses in groups. Only three homes were sold in Wenxi from August 1 to 14, compared with 52 in the same period last year, down 94% from a year earlier, and only one independent house was sold from July 25 to 31, down 96.3% from 27 in the week of July 11-17, according to MLS.
On the price side, according to the real-time tracking MLS system of Canadian real estate agency Zolo, as of Aug. 16, the average house price in Vancouver was C $1.1 million per unit, down 20.7% in one month; the average price of a house in North temperature was C $1 million, down 17.3%; and the average price of a house in Richmond was C $779000 per unit, down 17.6% from 28 days ago.
According to an official survey in BC province, a total of 19383 residential property transactions took place in the province in the five weeks of June 10 and July 14, of which overseas buyers accounted for 1276, or about 6.6 per cent. However, the Dawen area, including the metropolitan area of Vancouver, accounted for 49.7 per cent of transactions in the province in the past five weeks, with overseas buyers accounting for 73.3 per cent. From this point of view, the rapid rise in house prices in Vancouver in the short term is mainly the result of speculation by a small number of overseas buyers.
In July, BC province released its first “overseas buyer data” on the property market. Between June 10 and 29, investors from Chinese mainland accounted for 76.6 per cent of total home purchases by foreign investors, according to the data.
According to media reports, Peter Rutledge, a financial analyst at the National Bank of Canada, said in a report that Chinese buyers spent C $12.7 billion (US $9.6 billion) on property in Vancouver last year, accounting for 33 per cent of total local property sales.
The Philippines, India and China have long been the top three sources of Canadian immigrants, according to data published on the Canadian government website. Since 2012, as of the first quarter of 2016, nearly 100000 Chinese citizens have been granted permanent residency in Canada.
According to media reports, at the end of 2014, the number of Chinese students studying in Canada was as high as 110000, accounting for 1/3 of Canada’s total foreign student population and three times the number of the second Indian student.
