Chinese buyers cooling on Canada
September 27, 2017
The price of this West Vancouver house, listed in the spring at $4.6 million, sold recently for $2.8 million.
China-based foreign homebuyers—who have been the focus of intense debate and punitive taxes in Canada over the past year—have switched their focus to other countries, based on searches on China’s biggest real estate portal for foreign property, Juwai.com.
A key reason may be fears of dwindling returns in the Canadian housing market.
“By the number of buyer inquiries, Canada has lost its global third-place ranking to Thailand, which has seen its inquiries surge enough to push it from 6th place globally in 2016 to 3rd in 2017,” according to a Juwai survey released September 16.
Canada had 30 per cent more inquiries so far this year as compared to 2016, Juwai reports—better than the global Chinese buyer search rate of 8.7 per cent in the same period.
The top Canadian cities for Chinese buyers in the first half of 2017 were, in order, Toronto, Montreal, Vancouver, Ottawa and Victoria.
Ontario implemented a 15 per cent sales tax on foreign homebuyers this year, following the lead of B.C., which launched a similar tax in August 2016 that covered Metro Vancouver.
According to a survey of 4,000 Chinese consumers who use Juwai.com’s portal, nearly a third said they were considering a home purchase in Canada for investment purposes.
But if the effect of the foreign-buyer tax in Metro Vancouver is any indication, a lack of investment returns combined with much tighter currency regulations in China may cool the investment attraction.
West Vancouver and Richmond, two upscale communities that the B.C. government said were prime destinations for foreign buyers before its tax was introduced, are the only two Metro Vancouver municipalities where detached house prices have declined in the past year.
Benchmark prices were down 6.7 per cent to $3.64 million in West Vancouver for the 12 months ending in August, and were down 0.9 per cent to $1.6 million in Richmond. During the same period, the overall Metro Vancouver detached house price increased 2.2 per cent to $1.6 million, reports the Real Estate Board of Greater Vancouver.
West Vancouver Re/Max real estate agent Brent Eilers said that foreign buyers now immediately discount a listing price by 15 per cent to compensate for the tax and “then negotiate down from there.”
Byron Burley, British Columbia-based Juwai.com vice-president, believes China-based buyers will continue to invest in Canada.
“[Canadians] are no longer worried that Chinese are responsible for high local prices, [and] Chinese buying continues unabated. Chinese buyers still appreciate Canada. Chinese investors still believe the Canadian market is a good one, and Chinese seeking a better life are still taking Canada as one of their preferred destinations,” Burley said.