Sales of condos and townhomes could soften in Canada’s two largest housing markets as first-time buyers face tougher lending rules that take effect on Monday.
The mortgage changes will likely be felt especially hard in Greater Vancouver and the Greater Toronto Area, according to the Canadian Real Estate Association.
“First-time home buyers, particularly in housing markets with a lack of affordable inventory of single-family homes, may be priced out of the market by the new regulations that take effect on Oct. 17,” CREA chief economist Gregory Klump said in a statement on Friday.
He made the comment as CREA released data showing the average price for various housing types sold nationally in about 100 markets in September reached $474,590, up 9.5 per cent from the same month in 2015. Sales volume increased 4.2 per cent.
Last week, the federal government announced measures to tighten mortgage rules. Ottawa is also closing tax loopholes used by some foreign buyers.
In most cases, homeowners who are looking to upgrade to larger houses must first sell their existing properties before they are able to acquire their next place.
The residential areas of Downtown Vancouver comprise 3 main areas:
- Yaletown – which borders the north side of False Creek and much of it originally was developed by Concord Pacific after the Expo 86 World’s Fair;
- Coal Harbour – which is the strip of newly developed condos north of West Georgia Street and West of Burrard Street; and
- The West End – which comprises the downtown core and west of Burrard Street.
It seems that the new 15% tax on “foreign” buyers has had very little impact on this market, especially with condos where the asking price is under $2 million. There are many reasons for this:
- Only 1-5% of the buyers in this segment traditionally have been “foreign”;
- More and more “empty nesters” from the West Side of Vancouver sell their homes after their children have moved out and downsize by moving downtown and retire on the capital gains earned by selling their detached homes;
- The buyers are from all backgrounds: local retired people, young singles and married couples (usually with no children or with small families), Chinese immigrants, Koreans, Iranians, Americans, Eastern Europeans, Middle Easterners, etc. In other words there is strong demand from all segments of the market;
- There seems to be increasing interest in this area from “foreigners” from the USA, typically young hi-tech professionals from San Francisco and San Jose, and older couples from Seattle and Los Angeles, all of them attracted by the diversity, safety, cuisine, scenery and recreational opportunities downtown Vancouver has to offer.
- Being close to the Central Business District is extremely convenient for the tens of thousands of professionals of all kinds who work downtown.
What’s so special about the Downtown core of Vancouver? Well, it depends on the specific neighbourhood: