Possible Effects of FIT on Assessments
In the Beginning
The metropolitan area of Vancouver stretches east from the City of Vancouver to Langley, down the Fraser Valley.
As foreign Investors forced prices up in West side Vancouver and West Vancouver, home seekers moved east. This placed pressure on eastside Vancouver homes initially. Those buying had more money at their disposal than eastside purchasers. Demand exceeded supply and prices rose. The eastsiders were pushed east and the same scenario occurred all the way to Abbotsford (The domino effect).
Further increase in demand was caused by:
- Tight rental market
- Increasing rentals
- Low interest rates
- Net in migration
- Fear of further rising prices
Although banks cut back lending, the B-lending market increased substantially increasing Loan to Value ratios and demand.
Sales to Foreign Nationals
The BC government tracked sales from June 10th to July 14th to Foreign Nationals. % of the total # of sales were:
Sales in these areas make up 71% of all sales to Foreign Nationals in Metro Vancouver.
The tax will cause foreign buyers to have to pay 15% more for:
- Apartment buildings
- Development sites with residential zoning
- Commercial properties with some residential, bought for investment or development(1 storey commercial, 1 storey apartments)
In theory, these foreign groups would bid 15% less for all or part of these properties.
Supply and Demand
Price is determined by these factors. Hence, reduction in demand by removing some of these purchasers from the market would potentially reduce price. Some of the richer foreign investors may not care, but logically many should.
If the municipalities were to increase their rate of approval, supply would also increase. Other than a demand from foreign buyers, the demand constituents are still strong.
Home sales in July 2016 versus July 2015 were 18.9% less, although average benchmark price rose 1.4%. This continues a moderating trend that started in June, according to REBGV. Is this a levelling off of values?
Professor Davidoff of Sauder Business School, suggested that we would see a fall of 10% in values due to the tax.
The question is whether demand is still strong enough to keep prices at current levels? Or will the "domino effect" that started price increases, work backwards.
Affect on Assessments for 2017
Valuation date in BC is July 1st. The tax came out July 25th. State and condition is October 31st. There was no advance notice, so at July 1st, purchasers would not have been influenced. Hence any sales after July 25th may or may not be useful in determining values. But then state and condition is at October 31st. Is a market influenced by the tax "a state and condition" that BCA should take into account?
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