Luxury Housing Prices Taking a Tumble

It’s not time to panic sell just yet – but the housing market is certainly looking like it could see steadily decreasing prices for the next few months, or even years. According to the latest figures, in Vancouver’s most expensive neighborhoods like Point Grey, Dunbar and Kitsilano, housing prices are down by double-digit percentage points since this time last year.

For locals in that neighborhood, there’s one culprit for this: Attorney General David Eby’s luxury property tax on homes valued at more than $3 million.

There’s already a slew of angry protests against Eby and the tax in those neighborhoods, and they’ll likely result in a recall campaign next fall.

But the prices are still rising in the more “affordable” neighborhoods like Champlain Heights, Collingwood and Fraserview. It seems the new tax policies may have shifted demand to lower priced properties.

Whatever the impact on housing may turn out to be, it’s clear that the NDP’s policies are aimed at taming the market. But our co-founder, Daniel Greenhalgh, believes those efforts are misguided.

“Any time you have government trying to tax their way out of a market problem, it’s going to result in a domino effect of chaos that they can’t foresee or control. Think about the software industry – anytime you make changes to software, you’re making small, incremental, 1 degree or 2 degree course corrections. You’re tweaking a formula. But here, we’re seeing 15, 20 changes all at once. It’s an overcorrection, it’s creating more problems and the overall effect is going to be like a wrecking ball to our economy.”

Daniel doesn’t think the housing market is ready to collapse just yet, nor does he think it can. “Since the 1980’s, there hasn’t been a housing market retraction of more than 2 or 3%. Sales may slow, prices may dip, but the overall value rarely softens more than a couple of percentage points. I don’t think it will this time either. Vancouver will always be a desirable place to buy a home or buy property. But with all the new taxes and regulations, it’s going to hurt a lot of people’s businesses and I think ultimately it will raise housing prices and rents across the Lower Mainland.”

Daniel supports the CFIB’s suggestion to institute a make one/take one policy for regulations. For every new regulation, they say, the government should eliminate an existing one. “There are already too many on the books, that’s kind of universally acknowledged. So, if you’re going to add more bureaucracy, I think we should balance that by insisting that another regulation be removed.”

The housing market is definitely wobbling and adjusting its foundation under all the new taxes and rules, but it’s most likely too soon to forecast a sustained downturn. It’s a buyer’s market, but it’s probably wisest for all parties to stay in ‘wait and see’ mode.