VANCOUVER (BLOOMBERG) - The graceful six-bedroom house in a Vancouver neighborhood flanking one of Canada's top universities and a massive park would usually have been met with a slew of offers above its C$4.5 million (S$4.69 million) asking price.
That's if its July listing hadn't coincided with the week the government announced a 15 per cent tax on foreign buyers intended to cool the market. The grey wood-frame house was soon pulled and relisted for C$100,000 less before finally closing seven weeks later at just over C$4 million, 9 per cent below its original price.
Signs are mounting that North America's once-hottest real estate market - where the average home was appreciating by more than C$1,000 a day - is entering a downturn. Gone are the days of frenzy when buyers placed bids without inspecting properties and sellers collected all-cash offers. Properties are taking longer to sell, transactions are plummeting and in some cases prices are coming down in a city where the cost of housing has doubled in the past decade.
As Vancouver tops a list of global cities most at risk of a housing bubble, authorities are taking steps aimed at the froth.
On Monday, the federal government unveiled new rules to close a tax break on home sales by owners outside Canada and to tighten mortgage insurance eligibility requirements even for borrowers with large down payments. That follows the new foreign-buyer levy British Columbia introduced in August and Vancouver Mayor Gregor Robertson's plan for the city to start taxing vacant homes next year.
"Market activity ultimately comes down to sentiment, " said Adil Dinani, a Vancouver agent for Royal LePage, a unit of Brookfield Real Estate Services Inc. The slew of measures will "likely cause a pull back in activity, creating more questions on the direction of where the market is heading."
The sale of that grey 6-bedroom house just as the new foreign-buyer tax hit may have cost the owners about half a million dollars. Only a month earlier, a similar property, just two streets up, had sold 15 per cent over its asking price for C$4.48 million.
Other examples are cropping up across Canada's third-biggest city, ranked among the world's most livable and long a magnet for global cash. A three-story home in upscale Shaughnessy, located across from a park and within walking distance of a school and hospital, was listed at C$5.4 million and stayed on the market for more than two months. It recently sold for C$1.1 million under its list price, or 20 per cent under-asking.
Just east of the central business district, a house on a 3,050-square-foot lot listed last week for C$850,000 - a price unimaginable earlier in January when researchers declared that C$2 million was fast becoming the new threshold for buying a single-family home in Vancouver, according to listing and sale data provided by brokers.
"There's no doubt - the number of transactions has gone down and homes are on the market longer," said Dan Morrison, president of the Real Estate Board of Greater Vancouver. "The tax spooked everybody, and even locals are now holding back and watching."
Sales of detached properties in Greater Vancouver slid to 526 transactions this month until Sept 23, according to an agent who custom-compiled the data using MLS. That's 26 per cent lower than last month and almost half what it was in the year-ago period. Houses that took two to three weeks to sell are now staying on the market for double that time, Morrison said.
The tax has accelerated a slowdown that began earlier in the spring as prices reached eye-watering levels, said Wayne Ryan, a managing broker with Re/Max Holdings Inc who oversees a team of about 100 brokers in the region. "From the peaks last April, we've probably seen a 10 to 15 per cent correction," in prices for detached homes, he said.
An apartment in the Pacific Coast city needs to be rented about 40 years to pay for the cost of buying it - the highest price-to-rent ratio among the 18 financial centers surveyed, UBS Group AG said in a report last week, indicating housing prices are overdependent on low interest rates.
"The risk of a substantial price correction appears very elevated." it said.
Changes can play out more slowly in real estate compared with other markets. The effect on prices is yet to come, according to Keith Stride, a real estate agent in Vancouver.
Mr Stride, who grew up in the city, has watched homes pulled from the market this month to relist at lower prices, others selling for as much as 10 per cent under the asking price, or sitting on the market for longer than usual amid a growing glut.
The retreat is most apparent on his daily drives through neighborhoods to appointments and showings. In the frenzy of the market earlier this year, developers began purchasing homes with the intention of tearing them down and building massive new properties to resell at a higher price. The orange fences line the lots and the demolition permits were in place. Now, those homes are back on the market.
"Developers and or offshore investors who were planning to develop and make a buck seem to be running for the doors right now," said Mr Stride.