VANCOUVER (NEWS 1130) – Canadian banks will be required to look into what a 50 per cent drop in real estate prices in Vancouver would mean for their bottom lines, according to a new requirement put forward by the national regulator.
The Office of the Superintendent of Financial Institutions will also tell banks to look into how they can deal with 30 per cent property price drops in other regions, should that happen.
But that 50 per cent drop here seems an unlikely scenario, according to Vancouver’s mayor.
“Well, it’s hard to imagine anything of that magnitude,” says Mayor Gregor Robertson. “The fundamentals of real estate in Vancouver are strong. We’re one of the great cities in the world right now that people want to live in and grow businesses in. We’re having unparalleled economic success. This is the most sustained and successful economic boom in this city’s history, and that’s expected to continue for at least another five years because of the strength of the innovation and green economy here.
“We’re in good shape, economically. Hopefully, the housing market smooths out and the affordability comes for those who need it, that we get more rental housing, we get more low and middle-income housing that’s accessible to people. That’s where we need the supply. If [the price] drops at the high end of the market, that will affect some people for sure. But the great majority we need to see more affordability for.”
This comes as the province announces that starting August 2, foreign buyers and companies will be subject to an additional 15 per cent property transfer tax on residential real estate purchases in Metro Vancouver.
“We’d like to see things cool off,” says Robertson. “It’s just been out of control. The past year has just been surreal. A 30 per cent increase in prices — it just can’t last. Having a softer landing is important, smoothing things out. But it’s hard to know what’s going to happen next. It’s obviously a lot more solid lower down in the market. If this cools off the high end of the market, that’s probably a positive. But that doesn’t affect a lot of people. We’ll be keeping a close eye on all this, and keeping our focus on building more housing and focusing on rental housing and low and middle income housing in particular.”
LISTEN: NEWS 1130’s Martin MacMahon speaks with Vancouver Mayor Gregor Robertson
Robertson doesn’t appear concerned about the implementation of the tax on foreign buyers purchasing in Metro Vancouver and the coming introduction of a City of Vancouver specific “vacancy tax” creating a double whammy.
“I don’t think so,” Robertson says when asked about concerns of both taxes arriving in his city around the same time.
“We’ll see. I think the empty home tax — taxing vacant homes — will only affect people that can afford to have extra homes that are empty right now. Hopefully it gets a lot of those places rented, so instead of paying the tax, they have some income from that property and we create some more rental housing.
“That’s about creating more rental supply from housing that’s just sitting there empty right now. The 15 per cent tax, [it’s] hard to know what impact that will have on the market. It came as a big surprise to all of us. It’s something we’ll just have to watch and see how it goes. In general, people are concerned about housing. It’s good to finally see the province do something. We wanted that to happen over a year ago, but we’ve seen a big jump since then, and obviously an intervention is necessary.”
As for what Vancouver’s vacancy tax will actually look like, it remains a work in progress, with the aim to have it in place sometime next year.
When asked about what the rate could be, Robertson told us they haven’t worked the numbers out yet.
“It’s still at a staff level, figuring out how the tax will work. The big question is accessing the provincial data. We really have to access the BC government’s data — homeowner’s grant data, BC driver’s license data — so, we can actually administer this tax, because they have decided they’re not going to administer the tax through BC Assessment, the usual way that property tax is done. So, the city has to do it. It will be really difficult to do unless we have the province’s data. That’s how you figure out whether a property is empty or not.”