How to deflate a housing bubble, from Vancouver to Toronto GlobeDebate
This single-family detached property in Vancouver sold in mid-April for $3.4-million after being on the market for six months. The original asking price in October, 2018, was $4.5-million.Falling real estate prices are normally a negative economic indicator, but it’s been years since Vancouver had a normal housing market. Canada’s third-largest metropolitan area inflated into a bubble thanks to home prices that consistently rose much faster than local salaries.
The goal in Vancouver is to deflate the balloon before it pops. It’s a similar story in the Greater Toronto Area, the country’s largest housing market, which before 2018 became nearly as overheated., there’s lots of evidence Vancouver prices are pulling back. Some homes purchased last year or the year before, at the market peak, have changed hands this year at lower prices.
There are six reasons why Vancouver housing is finally moderating. In early 2018, the federal government introduced mortgage stress tests, effectively reducing how much Canadians can borrow. In 2015, B.C. created a 15-per-cent tax on foreign buyers. Last year, the provincial NDP government raised that tax to 20 per cent. It also raised a transfer tax from 3 per cent to 5 per cent on homes worth more than $3-million.
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