- Deals at C$1 million or more fell 65% in August, broker says
- Sotheby’s says Toronto and Montreal will benefit from slowdown
A tax on foreign homebuyers in Vancouver cut luxury purchases in Canada’s priciest housing market by more than half last month, according to a brokerage report. Meanwhile, high-end sales in Toronto surged.
Transactions in Vancouver of at least C$1 million ($759,000) slid 65 percent from a year earlier to 95 units in August, the month that a 15 percent transfer tax on deals by non-Canadian homebuyers took effect, according to Sotheby’s International Realty Canada. At the same time, luxury-home sales in Toronto and its suburbs doubled to 1,459 units, the high-end brokerage said.
The housing markets in Toronto and Vancouver are heading in separate directions after at least a decade of similar growth. Vancouver’s tax, which took effect Aug. 2, was implemented by the British Columbia government to cool prices in the city after they doubled in the past 10 years.
“We are going to see a clear divergence” between the two cities in this year’s final quarter, Brad Henderson, the brokerage’s chief executive officer, said in the report. There are hints that international investors are redirecting capital to Toronto from Vancouver, according to Sotheby’s, which also forecasts that Montreal will see more offshore investment.
In Vancouver, the tax “injected uncertainty into the market, and is anticipated to moderate sales activity and velocity in the fall,” the brokerage said. The long-term impact of the surcharge remains to be seen and the city remains in an affordability crisis, according to the report.
The tax hit Vancouver’s condominium market hardest. Sales of at least C$1 million dropped 49 percent in August from a year earlier, after rising 29 percent in 12 months through July. There were no deals for condos priced at C$4 million or more last month, compared with four in August 2015.
Sales of Vancouver’s most expensive homes, those priced at C$4 million or higher, fell 46 percent in August to 14 units, Sotheby’s said. In Toronto, demand for the same category of homes boomed, with sales rallying 69 percent last month from a year earlier. Sales of condos in the C$1 million-plus category more than doubled.
Sotheby’s said it expects Toronto’s luxury market to take the lead among Canada’s cities, outpacing Montreal, which probably will become a target for investors from Europe, China and the Middle East.