The new property transfer tax rate for foreign buyers in Metro Vancouver will likely bring home prices down, according to US ratings agency Fitch Ratings.
Under the new rate, which came in on August 2, foreign buyers of real estate in Metro Vancouver have to pay an extra 15% property transfer tax at the time of purchase.
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While Fitch has high hopes for the new tax, it says a recent decline in sales indicates Vancouver’s real estate had already started to cool before the tax was introduced.
According to a release by Fitch, Vancouver’s monthly sales have declined substantially by 21.5% since they peaked in February this year.
No official figures are yet available for the period since the foreign buyers tax was introduced.
However, Fitch said, a more substantial, real risk to Vancouver home prices would come if there were a rise in unemployment – but that doesn’t look likely yet.
According to Statistics Canada, Vancouver added 83,500 jobs in the last year, and the city’s unemployment rate has fallen to 5.5%, the lowest in Canada.
Overall, Fitch said, it estimated home prices in Canada were overvalued by more than 20%; the company’s overvaluation estimates for cities are due before the end of the year.