The return of foreign buyers and the Pacific market
Sep 23rd, 2021 | By FCT
Foreign buyers dominated headlines—and if those headlines are to be believed, the market, back in the early to mid-2010s. Two successive provincial governments in B.C. set up foreign buyers’ taxes in order to curb the perceived influence of offshore investors treating vacant units as commodities and driving up prices.
Through 2018 and 2019, the share of the Pacific market enjoyed by foreign buyers declined steadily, even against the backdrop of dwindling domestic buying power after the stress test came in. Then the COVID-19 pandemic started, and with the borders closed, nearly all foreign buying stopped.
Interestingly, through the tax introductions before the pandemic and the almost total cutoff of foreign buyers during the pandemic, housing prices continued to skyrocket in B.C. The discourse in Pacific real estate now frames foreign buyers as something of a scapegoat for the excesses of a supply-starved market. Now the foreign buyers are back, poised to fundamentally change the B.C. real estate landscape, but perhaps not in the way you might think.
Offshore investors or new neighbours?
The popular pre-pandemic image of the foreign buyer in B.C.—and Ontario, for that matter—is of a speculator buying properties to raise overall prices, selling to keep the profits, repeat. This type of buyer is still present in the market, but brokers and other lending professionals are seeing more of a focus on refinance and transfer business from those clients.
A more accurate profile for the buyers entering the B.C. market from overseas today shows someone looking to become a resident, coming in from East or South Asia, Australia or Latin America. These first-time (in Canada) buyers are coming in with a high degree of education on the market, looking to enter it and willing to work remotely. In short, they look a great deal like the local first-time homebuyers.
New buying crowd, same market pressures
The short housing supply in B.C., particularly in the lower mainland, has had Vancouverites looking for options long before COVID. But the pandemic offered an unexpected solution for many looking to leave the city—remote work. With many in the market now able to avoid a physical return to office, interest has spiked in areas outside the footprints of many financial institutions, as well as real estate and lending professionals.
Adapting to the shape of this new market has taken new perspectives and new technology. Automated Valuation Models (AVMs) allow for automatic property assessments by combining data about the property itself with sales data in the surrounding area to estimate the property’s value. AVMs are not without their drawbacks, but they offer two key benefits. By accessing the AVM data, appraisers can often avoid trips to distant communities, even for challenging properties. That convenience and the automated evaluation of simpler properties can shave weeks off a transaction—and saving time on closing has never been more important.
B.C. is already seeing the market swing back towards the heated, multi subject-free-offer environment that had defined it. Paradoxically, new foreign buyers have driven a return to a familiar overheated market, as a sudden wave of demand crashes ashore to find the same supply issues that have plagued the market for years. But perhaps this time, having been here before, and having some new techniques and technologies to help can make the difference.
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