Vancouver

For a while it seemed that the Vancouver housing bubble, the direct result of a relentless tidal wave of Chinese "hot money", had burst after last August the British Columbia province implemented a 15% property tax to stem the inflow of offshore funds. And indeed, in the immediate months that followed, Vancouver's housing priced tumbled from record highs.

However, it was not meant to be, and less than a year later, the Vancouver housing bubble is back, and it's (almost) bigger than ever.

Shortly after we remarked most recently on the unprecedented Canadian housing bubble that has migrated from Vancouver to Toronto, Gluskin Sheff's Chief Economist David Rosenberg joined the growing chorus of calls for government intervention into the Toronto housing market. In an interview on BNN, Rosenberg, who correctly called the U.S. housing bubble in 2005 when still at Merrill Lynch, said the massive deviation from historical norms has him drawing comparisons between the two situations.

Just about 6 months from when the BC government introduced its 15% property tax for foreign buyers of homes in Vancouver, the verdict is out: The new tax has had significant impact on not only home prices in greater Vancouver; but has also resulted in a significant decline in the number of foreign buyers in that hot housing market.

IMMEDIATE GRATIFICATION

The new tax took effect on all transactions taking place from Aug 2, 2016 onwards. By October 28th, the government had reported receiving what one might term instant gratification. 

One year ago, when we first started discussing the Vancouver housing bubble, which as we first speculated - and was later confirmed - was the result of Chinese oligarch money-launderers parking "hot cash" in this offshore housing market (at least until a 15% property tax on foreign purchases made Seattle the new Vancouver), we said that Vancouver houses had become the de facto new Swiss bank account, and because of that the houses - once purchased - would remain a highly overprized, if vacant tribute to China's soaring capital outflows.

What a difference a year makes.