Cast your mind back to September 2018, Vancouver had just been revealed by Knight Frank as having the world’s weakest luxury housing market. Fast forward a year and nothing has changed – Vancouver remains rock bottom of the Index.
During the late 2000s and early 2010s, Vancouver was a juggernaut with a growing luxury real estate market that spent a couple of years at the top of the ranking. The city’s decline began in 2016 and Vancouver has now been the world’s weakest luxury housing market for the fourth quarter in a row. So, why has this happened and what’s changed?
Why has Vancouver’s luxury real estate market weakened?
The latest Prime Global Cities Index shows luxury real estate in Vancouver price decreased 13.6% over 12 months and a decrease of 2.4% over the past three months.
It’s no coincidence that Vancouver’s declining luxury real estate market began in 2016 when British Columbia introduced a 15% foreign buyers’ tax for Vancouver and surrounding areas, which has since been increased to 20%.
Much of Vancouver’s luxury real estate growth was fuelled by foreign investors and the housing market is undoubtedly stuttering following the taxes and regulations introduced to slow down the growth that made Vancouver the most unaffordable city on the continent.
In February 2016, British Columbia also introduced a 3% luxury tax for homes sold for at least $2m, on top of the 1% already on the first $200,000 and 2% tax on the portion between $200,000 and $2m. A further 2% was added to those greater than $3m from February 2018.
Vancouver vs Toronto luxury real estate
Ontario introduced a similar 15% foreign buyers’ tax for the Toronto area a year after British Columbia, and the city’s luxury real estate market also saw a subsequent decline. However, Vancouver’s slide has been far more dramatic because of other additional measures to combat price inflation.
Toronto, the only other Canadian city found in the list of 46 cities, has now shaken off the initial impact and has shown promising growth in luxury real estate over the past three and 12-month period.
Toronto was ranked thirteenth in the most recent index, registering a gain in prices of 3.8% over 12 months and 2.8% over 3 months, making it the highest-ranking city in North America among the 46, beating Miami, San Francisco, and Los Angeles.