Vancouver home for sale

China’s Capital Controls Chokehold Luxury Sales

Steve Saretsky -

Detached Sales in Vancouver Plummet to Record Lows in January

There’s nothing I love more than debating the impact of foreign capital distorting the Vancouver real estate market. Not that more evidence was needed, but recent changes in the Vancouver real estate market highlight some eye opening January stats.

Recently China implemented new capital controls forbidding citizens from exporting cash to purchase international real estate. (The Chokehold). The timing could not have come at a worse time as sales were already slowing from a 15% foreign buyers tax.

So what happens when you turn off the tap?

In January, Richmond detached sales fell 66% year over year, Vancouver West fell 72%, while West Vancouver sales fell 74%. For Vancouver West and West Vancouver it was the worst January on record. It was the second worst January for Richmond sales, trailing only January 2009 (Financial crisis).

Make no mistake this is not a return to normal from a hot 2016. As seen in the chart above, Vancouver West detached sales fell 61% below the 10 year average, West Vancouver fell 51% below the 10 year average, and Richmond dropped 46%.

With the benchmark price of homes in these areas so incredibly high (Richmond $1,581,100, Vancouver West $3,443,100, and West Vancouver $2,948,200) it’s no wonder locals have not been able to pick up the slack.

As sales falter, inventory continues to pile up, adding further downwards pressure on prices. Zolo Realty has the average price dropping 28% in Vancouver. However, averages can be volatile and from what I see it’s about 20% in these areas.

One has to think Christy Clark will reverse the foreign buyers tax if she’s re elected and perhaps this weeks announcement was just the start.

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022