Home sales in Metro Vancouver plunged by 32.6% last month compared to the same month last year, the city’s real estate board said Tuesday. This is a sign that one of the hottest real estate markets in the world may be rapidly cooling down.
The Real Estate Board of Greater Vancouver said there were 2,253 homes sold last month, a steep drop from the 3,345 home sales recorded in September 2015. Last month was the second month that a 15% tax applied to foreign buyers of property in the city.
Read: B.C.’s real estate tax was a political gamble. Will it pay off?
“There’s uncertainty in the market at the moment, and homebuyers and sellers are having difficulty establishing price,” said real estate board president Dan Morrison in a news release.
The marked drop in the number of homes sold last month follows a 26% year-over-year decline in August.
One issue is the composite benchmark price for all residential properties was $931,900—a 28.9% increase compared to the same month last year, but a 0.1% decline compared to August 2016.
Morrison said there is more demand for condominiums and townhomes than detached homes, supporting some analyst predictions that there’s still interest among first-time buyers to get into the Vancouver market.
And, concerns have intensified about the city’s real estate sector, with some experts predicting it is prone to a sharp correction.
Last week, Swiss bank UBS also released a report that said the city had the greatest risk of a housing bubble when compared to 17 other high-priced large markets including London, New York and Sydney, Australia.
Read: Two futures for Toronto and Vancouver real estate
Prior to today’s data release, realtors were predicting a steep decline in detached-home sales. They also expected numbers to give further insight into the effects of British Columbia’s foreign-buyers tax, which came into effect Aug. 2 after the market was already starting to cool.
That’s because Premier Christy Clark has said the aim of the tax on foreign buyers was to cool off Metro Vancouver’s overheated housing market.
Also, on Monday, the federal government introduced a pair of new housing measures that could have an impact on Vancouver’s market in the months to come.
As of Oct. 17, all insured mortgages will have to undergo stress tests to determine whether borrowers will still be able to make payments if interest rates rise or they lose their jobs.
The federal government also limited to Canadian residents a tax exemption for capital gains made when homeowners sell their primary residences. Read: Feds close loophole on capital gains exemption