Released Monday, statistics from the Canadian Real Estate Association reveal that home sales in the country have fallen for the third consecutive month. National home sales fell 1.3% month-over-month in July and 2.9% year-over-year, while the average price jumped 14.3% year-over-year last month. Newly listed homes, meanwhile, increased 1.2% month-over-month.
“The new 15% property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on August 2nd,” said Gregory Klump, CREA’s Chief Economist. “So it will take some time before the effect of the new tax on sales and prices can be observed. That said, the new tax will do little in the short term to increase the supply of homes.”
Portfolio Manager at Industrial Alliance Securities Inc., John J. De Goey, sees the 15% property transfer tax a publically acceptable way for politicians to add to their coffers. “It’s a win-win situation because voters are happy to tax the people who are driving up prices,” De Goey says.
While some experts think the new tax will drive investors away from real estate and into the stock market, De Goey does not envisage such a shift in investor attitudes. “If there is an arbitrage opportunity, I just don’t see it,” De Goey says. “I think the new tax will have a modest impact on the real estate market and, as far as I can see, it will have no meaningful impact on the stock market.”
But this doesn’t mean that advisors can afford to take their eyes off of the real estate market. Advisors are under increasing pressure to become ‘full-service’ and those who are unable to talk to clients about their real estate investments risk being left behind.
“A good advisor should be aware of all macro trends: interest rates, trade GDP, employment and real estate. I think they should always bear them in mind when giving advice,” De Goey says. “You need to be ever vigilant and mindful of trade-offs and opportunity costs. If I put $100,000 into the stock market what should I expect in return compared to putting $100,000 into real estate? Advisors should be considering this.”