2016 was a dramatic year for real estate. The rules of engagement changed. Buyer behaviour changed aggressively. The government changed the actual rules of the game.
The first half of 2016 was out of control. If a house in New West had a roof and a front door, you were almost assured a million dollars. It only took until June for the consumers to reign themselves in. The market peaked and showed all the signs of cooling.
In July, the Provincial government announced the Foreign Buyer Tax. It was an aggressive move that created fear in an already cooling market. The result, almost no sales in August, and a feeling-out period through Autumn (we don’t say Fall, it’s bad for business). The Federal Government threw their own wrench and tightened lending rules. The impact on borrowers is limited to a small group, but it certainly created fear that it would bring down prices. A double whammy and a recipe for a significant drop in prices.
Home prices were out of reach for middle-class Canadian dual-income households. The government wanted to prevent a never ending rise in prices. Looking at it today, they succeeded. I look to the future and wonder if its impact will be too harsh. A small number of foreign buyers drove prices up, and Canadians played along.
There are far more Canadians who own high priced homes than foreigners. I have no desire to see any of them lose in such a way that it devastates their family. They purchased under free market conditions, which gave them some assurance. The government has taken that away. Will there be more affordability for a thirty-something like me? Of course! Has the government gone too far and created too much risk for its citizens already engaged in the real estate market? It appears the short term effects are going to be the most noticeable. Read my next newsletter for insight on how the Government has created a rise in interest rates.