It’s hard to lose money in real estate these days, almost anywhere, but Vancouver is among an elite group of cities where the wealthy are doing just that.
The city, once an unstoppable juggernaut of foreign money and rising prices, has ranked at the bottom of a list of the world’s hottest luxury housing markets for the fourth quarter in a row.
That means Vancouver has now spent a year as the world’s weakest luxury market in Knight Frank’s ranking of 46 major world cities. Luxury house prices fell by 13.6 per cent over the past year, the real estate agency said.
Toronto ranked 13th, with prices up 3.8 per cent in a year. Those two are the only Canadian cities on the list.
Meanwhile, the new ranking champion of luxury housing is Berlin, where luxury homes jumped 12.7 per cent in price over the past year, despite a slowing economy in Germany.
There’s no cutoff for what counts as “luxury” housing; rather, Knight Frank defines it as the top 5 per cent of a housing market.
Vancouver spent a few years at the top of the ranking, before it began a decline in 2016 after British Columbia introduced a 15-per-cent foreign buyers’ tax for Vancouver and surrounding areas, which was later bumped up to 20 per cent.
Ontario introduced a similar 15-per-cent tax for the Toronto area a year later, and the city’s luxury market slid in the rankings after that measure came into place.
Watch: What’s behind Canada’s skyrocketing rents, and what we can do about it. Story continues below.
But Vancouver’s slide has been far more dramatic. “Whilst both operate a foreign buyer tax, Vancouver has seen a flurry of additional measures aimed at reducing speculation and curbing price inflation,” Knight Frank noted in its report.
That includes a controversial empty-homes tax, which charges one per cent of a home’s assessed value for every year, or majority part of a year, that it’s unoccupied.
Still, Vancouver is in good company among the cities whose luxury housing markets are tanking. Prices are falling in New York, London, Shanghai and Istanbul, among others, the ranking showed.
Market observers say a decade of low interest rates helped push up the price of luxury housing around the world, but that process is now running out of steam.
Also, in our globalized economy, money from all around the world affects local house prices, and that’s especially true at the top end of the market. Increasingly, housing slowdowns are synchronized around the world.
But Vancouver’s housing market is showing signs of stabilizing, with sales up 24 per cent in July, compared to the same month a year earlier. Some observers say they’re seeing a pick-up in interest from foreign buyers, particularly among Hong Kong residents worried about the city’s escalating protests.
CORRECTION: A previous version of this story stated that the B.C. foreign buyers’ tax for Vancouver and surrounding areas was bumped up to 25 per cent. In fact, it was bumped up to 20 per cent.