CANADA’S HOUSING MARKET
April 20, 2017
Vancouver’s foreign-buyer tax in context
As the government of Ontario unveils its plan to address risks from overheating housing markets in Toronto and across Southern Ontario this morning, it is insightful to look at the effects of the 15% tax on purchases by foreign nationals in Metro Vancouver imposed
in August 2016 by the BC government. A non-resident buyer tax is touted as a main plank of Ontario’s plan. We observe that the impact of the tax in Metro Vancouver was more evident on housing prices and purchases by foreign nationals than on home resale activity, which had been slowing for several months before the tax was even announced.

The 15% foreign buyer tax in Metro Vancouver was one of a series of measures and events that began in December 2015 and
which contributed to cool home resale activity in the area starting in early 2016. In fact, most of the cooling in activity had already taken place by the time the BC government made its surprising announcement on July 25 and its implementation on August
2.
Vancouver-area home resales
Thousands, SAAR
Feb. 2016: New federal rules come into effect. BC
budget 1) rejigs property transfer tax with no
exemption given to non-residents; 2) announces
collection of foreign buyer data.
70
60
Marc h 2016: BC
government moves to end
shadow flipping
Dec . 2015: Federal government announces
increase in minium down payment for homes
valued between $500K and $1MM effective
Feb. 15, 2016
50
June 2016: BC
government reclaims
regulatory oversight of
provincial real estate
industry.
40
July 25, 2016: BC
government announces
15% foreign buyer tax
in Metro Vancouver.
30
August 2,2016: BC's
foreign buyer tax
comes into effect.
20
Oc t. 2016: Federal government announces 1)
higher qualifying rates for insured mortgages
and 2) closing of a loophoole allowing
non-residents to claim principal residence
exemption.
10
0
2013
2014
Source: CREA, RBC Economics Research
Robert Hogue
Senior Economist | 416-974-6192 | [email protected]
2015
2016
2017
CANADA’S HOUSING MARKET | APRIL 20, 2017

That being said, the tax likely had a noticeable moderating effect on prices. Its announcement in July coincided with the cyclical
peak for price increases in the area, and its implementation in August coincided with the first weakening in annual price growth
in more than three years.
Vancouver-area composite MLS Home Price Index
Year-over-year % change
50
June 2016: BC
government reclaims
regulatory oversight
of provincial real
estate industry.
Marc h 2016: BC
government moves to
end shadow flipping
40
Feb. 2016: New federal rules come into effect. BC
budget 1) rejigs property transfer tax with no
exemption given to non-residents; 2) announces
collection of foreign buyer data.
30
20
Dec . 2015: Federal government announces
increase in minium down payment for homes
valued between $500K and $1MM effective
Feb. 15, 2016
10
July 25, 2016:
BC government
announces 15%
foreign buyer
tax in Metro
Vancouver.
August 2,2016: BC's
foreign buyer tax
comes into effect.
0
Oc t. 2016: Federal government announces
1) higher qualifying rates for insured
mortgages and 2) closing of a loophoole
allowing non-residents to claim principal
residence exemption.
-10
-20
2013
2014
2015
2016
2017
Source: CREA, RBC Economics Research

Aggregate prices then fell for five straight months on a month-over-month basis, thereby contributing to moderate annual rate
of increase from 32% in August to 13% in March.
Vancouver-area composite MLS Home Price Index
Month-over-month % change
6
Marc h 2016: BC
government moves to
end shadow flipping
5
Feb. 2016: New federal rules come into effect. BC
budget 1) rejigs property transfer tax with no
exemption given to non-residents; 2) announces
collection of foreign buyer data.
4
3
July 25, 2016:
BC government
announces 15%
foreign buyer
tax in Metro
Vancouver.
Dec . 2015: Federal government announces
increase in minium down payment for homes
valued between $500K and $1MM effective
Feb. 15, 2016
2
June 2016: BC
government reclaims
regulatory oversight
of provincial real
estate industry.
August 2,2016:
BC's foreign buyer
tax comes into
effect.
1
0
Oc t. 2016: Federal government announces
1) higher qualifying rates for insured
mortgages and 2) closing of a loophoole
allowing non-residents to claim principal
residence exemption.
-1
-2
2013
2014
Source: CREA, RBC Economics Research
RBC ECONOMICS | RESEARCH
2
2015
2016
2017
CANADA’S HOUSING MARKET | APRIL 20, 2017

The shock/signal that the tax represented for both buyers and sellers in Metro Vancouver is probably the factor that tipped local
prices into negative m/m territory. While significant, the loosening of demand-supply conditions that took place in the months
leading to the tax was still insufficient to drive prices lower. The sales-to-new listings ratio dropped significantly from super
tight levels during the spring and summer last year but at the end of it the ratio still pointed to balance between buyers and
sellers—which argued for moderate price increases, not outright declines.
Vancouver-area sales-to-new listings ratio
Seasonally adjusted
1.00
July 25, 2016:
BC government
announces 15%
foreign buyer
tax in Metro
Vancouver.
0.90
seller's market
0.80
0.70
0.60
0.50
balanced market
0.40
0.30
August 2,2016: BC's
foreign buyer tax
comes into effect.
buyer's market
0.20
0.10
0.00
2013
2014
2015
2016
2017
Source: CREA, RBC Economics Research

Moreover, the tax clearly had a dampening effect on purchases by foreign buyers in Metro Vancouver. According to BC government statistics (collected since June last year), the share of residential property transactions involving foreign nationals was cut
by more than half before and after the tax. In June, the share was slightly less than 10%. In the last two months of 2016, that
share was a little more than 4%.
Share of foreign buyer involvement in residential transactions
%, Metro Vancouver
16
15.1
July 25, 2016:
BC government
announces 15%
foreign buyer tax
in Metro
Vancouver.
14
12
10
9.9
8
6
August 2,2016: BC's
foreign buyer tax
comes into effect.
4
2.7
2
4.2
4.2
Nov-16
Dec-16
3.0
0.9
0
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Source: BC government, RBC Economics Research
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