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Foreigner tax

Vancouver’s tax on foreign property buyers has had a lot of enthusiastic support in New Zealand. New Zealand’s press has so far missed a few important aspects though.

The Globe and Mail reports that while sales dropped 23% in August, after the tax, as compared to July, July’s sales were down 27% from June.

But let’s remember that we’re looking at a single month of data, in a sector prone to volatility and mood swings, capable of being altered by quirks of the calendar or a bit of rainy weather. And frankly, it’s impossible to tell how much of August’s downturn we should be laying on the doorstep of the new tax on foreign buyers.

Remember that Metro Vancouver’s sales in July – before the tax was announced – fell 27 per cent from the previous month and were down 19 per cent from a year earlier. Maybe, just maybe, an overheated market has begun the process of cooling down all by itself, without a new tax to blame.

The fact is, what we know about foreign buying in the Greater Vancouver market is still statistically flimsy and largely anecdotal. The B.C. government introduced its tax after compiling data for a mere five weeks – from June 10 to July 14 – showing that foreign buyers accounted for about 10 per cent of residential purchases in Greater Vancouver. It’s a substantial number, but a puny time sample. It’s impossible to know if it was representative; indeed, sales may have been distorted by rumblings that the government was preparing to crack down on foreign buying.

Similarly, the August sales data provide thin grist for the analytical mill. It simply isn’t enough time for anyone to confidently say what is going on.

Lindsay Tedds, economist and Associate Professor at the University of Victoria (British Columbia), warns further that August’s slump likely also reflects some sales having been brought forward to July to beat the tax. In that case, August’s real drop is smaller than reported, and July’s drop is larger than reported.

She points also to this piece at the Globe and Mail:

When she heard NZ might be tempted to apply some Vancouver learnings, she tweeted:

Everybody in NZ needs to take a deep breath before chasing Vancouver on this one.

Bryce Wilkinson’s piece in last week’s NBR is also worth reading.

About Eric Crampton (88 Articles)
I'm Head of Research with the New Zealand Initiative.

1 Trackback / Pingback

  1. Vancouver’s foreign-buyer tax: the solution for an overheated Auckland market? |

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