What we think about the Canadian Foreign Buyer Ban
By now, you’ve probably heard the news: Canada has released new regulation governing the purchase of residential real estate by non-Canadians, also known as the Foreign Buyer Ban. And, if you’re here, you’ve probably already read our initial post on the matter. And if you’re in Whistler or Pemberton, you’ve probably seen some posts from REALTORS® cheering the news that Whistler and Pemberton appear to be exempt from the ban.
We’re going to take a more measured approach. We’re not excited that it doesn’t apply in one place or sad that it applies in another (Squamish) and there are a few reasons why.
Firstly, our feelings on the matter don’t matter. We can tell you what we think about the government’s ban and why, but it’s irrelevant and really only good for casual conversation over a glass of wine. What does matter is how we think it’s going to affect our markets and what it means for our clients and the strategies we recommend to them.
Secondly, it may not have as big of an impact as people think, one way or the other. So, as Leonard Cohen said: Let’s go deeper.
On one hand, the intention of the Foreign Buyer Ban was to impact housing affordability for Canadians. The existence of foreign buyers in the Whistler market is not what is driving up the prices for everyday Whistlerites. It’s also not what’s driving up prices in Squamish or Pemberton where we have relatively few foreign buyers. So, on the other hand – if implemented here, the ban would likely to have little impact on housing affordability in our areas. This is not to say that in some metropolitan areas the ban will not have an effect. It is possible that whole condo buildings were bought up by foreign entities as speculative investments, but we don’t play in those markets, so we’re not really sure if this was actually an issue or if the government is just politicking for votes. If you’re interested in the Greater Vancouver market or any other large metropolitan market in Canada, we can connect you with a REALTOR® there who knows their stuff and can advise on the effect of the ban in their location.
How will the Foreign Buyer Ban affect the Whistler Market?
Of course we can’t predict the future. Canada Mortgage and Housing Corporation(CMHC) with all their national statistics predicted an 18% DECREASE in pricing across Canada during the pandemic, and look how that turned out. But we do have some thoughts on what could happen.
Pricing could be buoyed. Basically this means that pricing won’t crash. We weren’t expecting prices to crash in our markets, but a lot of people were hoping. In fact, homeowners may take this as a signal that they should hold out for that elusive foreign (or even lower mainland) buyer willing to overpay, stalling the market if they don’t materialize, and giving us more of the same that we’ve seen over the past 6 months. Let’s hope that doesn’t happen – it’s not really good for anyone. With fewer listings on the market, people have less choice and it makes it difficult for anyone to purchase. This is in opposition to downward pressure on values exerted by ever increasing mortgage interest rates, as purchasing power is diminished for many buyers. Combined we may expect to see continued pricing stability rather than any sharp increases or decreases, but we continue to monitor the statistics, and different sub markets may perform differently than each other. Single Family homes could move differently than tourist accommodation rental revenue properties for instance, as each will have a different sensitivity to interest rates and/or the influence of foreign buyers.
Foreign buyers tend to be more prevalent in our luxury markets and Tourist Accommodation (Phase 1 and Phase 2 rental covenant) markets. We would argue that AirBnBs are having more of an effect on driving up pricing of Phase 1 rental properties, but they are zoned for tourist accommodation (TA), so we can’t begrudge anyone from making good returns on their TA zoned properties – that is the purpose of these centrally located units. Again: revenues are driving up pricing on Phase 1 and Phase 2 properties – but one can’t live in a Phase 2 condo-hotel property, so they don’t have an effect on housing supply. As long as the return on investment is good (taking into consideration all factors like interest rates), these will hold or go up in price, until that return doesn’t make sense anymore. In this respect there are enough Canadians who can afford these places as evidenced by what we saw during the pandemic.
In fact, during the pandemic, we saw an almost complete stop in foreign influence on our market in the later half of 2020 into 2021. Canadians made up the difference and then some with pent-up demand. We are severely under built for the amount of housing needed in Canada. We have two huge generations moving out of their parents’ homes, while boomers are working longer and living longer. In this respect, households are literally splitting in two. We need more housing, and this was certainly evidenced by the prices Canadians were willing to pay to live here, in the Sea to Sky Corridor.
For our luxury market, yes, we may see a few more foreign buyers who are no longer able to purchase luxury in the lower mainland. Luxury is almost like its own separate market. Pricing may trickle down slightly into what we’ll call “regular” housing, but until we see it for ourselves, we don’t actually expect a run on residential housing in Whistler. Many Whistlerites are probably concerned about the prices of “regular” single family homes and certain Phase 1 condos that they could live in full time. As previously discussed, there are other factors having, what we feel, more significant impacts on those prices right now, but we will certainly be watching the stats, and we’ll keep everyone up to date right here on our site.
How will the Foreign Buyer Ban affect the Pemberton Market?
Okay. What about Pemberton? Well, as mentioned in our last article, there may be some spillover from the Whistler market IF foreign buyers figure out that they can buy here and that creates a run on housing product. But, keep in mind, our market is small. What is more likely to happen is that foreign buyers will get the message that Canada has a foreign buyer ban, and those that want to move their money will put it in the US, or somewhere else they perceive as relatively safe. Those that know Whistler and were already looking here will be relieved, but we were already working with these people in our market anyway. We do not think there is likely to be a run on Whistler real estate. We may see a few more luxury sales and we expect the Pemberton market to remain relatively unaffected by foreign buyers.
How will the Foreign Buyer Ban affect the Squamish Market?
Squamish will likely remain unaffected by the ban as well. Now remember, the ban applies in Squamish, but we weren’t seeing huge numbers of foreign buyers in Squamish. Squamish has a diverse population, and many of the cultures that we see influencing Squamish life (and making it great, by the way!) are Canadians or Canadian Permanent Residents. People in Squamish are buying individual homes, townhomes, and condos for their personal use, or in some occasions, as investment properties to rent out long term. Our communities need rentals too – our vacancy rates in all three of our municipalities are very low, so we appreciate people for putting long term rentals into our markets.
The bottom line
Our bottom line is: we’re not going to recommend that our sellers pump up their prices across the board just yet, and we’re not going to recommend that our buyers over pay, nor expect to see prices decline any time soon. We will be monitoring the situation very closely and give measured, individual advice to each of our clients depending on their situation. We expect this to actually be much ado about nothing, at least insomuch as it affects pricing in our housing market. If you would like to know how much your property could be worth in this market, OR if you would like to discuss your property purchasing options, give us a call:
Now – if you’d like to get a glass of wine or beer and shoot the sh*t on how you feel about the Foreign Buyer Ban, we’re happy to do so. Give us a shout! 😉
