November 29, 2016 / 9:35 PM / a year ago

UPDATE 1-Foreign buying of Vancouver homes edges up as tax shock abates

(Adds comments from provincial finance minister, real estate agent, economist)

By Nicole Mordant

VANCOUVER, Nov 29 (Reuters) - Foreign purchases of Vancouver-area properties nudged off lows in October as international investors, initially unnerved by a tax on foreign home ownership aimed at cooling red-hot prices, returned to Canada’s most expensive property market.

Foreign buying may have been artificially low in the months since August when a 15 percent foreign property transfer tax was introduced, as a large number of transactions were advanced to July to avoid the tax, economists and real estate agents said.

“Foreign purchases are re-emerging to a limited degree,” British Columbia’s finance minister, Michael de Jong, told reporters after releasing the province’s fiscal forecast.

Overseas investors made up 3 percent of home sales in October in metro Vancouver, according to data from the Finance Ministry. That compared with 1.8 percent in September and 1.4 percent in August, but still well down from the 13.2 percent between June 10 and Aug. 1, the period before the tax took effect.

The provincial government introduced the tax after many residents and housing advocates complained that foreign buyers, especially from China, were driving up prices and making homes unaffordable for local people. Critics of the tax have said it is unfair to existing property owners and will hurt the economy.

The provincial government expects that foreign property purchases would settle at around 4 percent to 5 percent of total sales over time, Finance Ministry spokesman Jamie Edwardson said.

Cameron Muir, chief economist at the B.C. Real Estate Association, said it was too early to say whether the increase in October signals a return of demand, but he said some of the recovery is just a bounce back from artificially low levels in September after buyers moved early to avoid the tax.

In Richmond, a Vancouver suburb which according to provincial data has the highest concentration of foreign buyers, international property purchases rose to 7.2 percent of the total transaction value in October compared with 3.1 percent in September.

The province said it was closely monitoring foreign house purchasing data from an area on the southern tip of Vancouver Island, which includes Victoria, the province’s capital, where foreign purchases accounted for 10.3 percent of the value of transactions. The property tax does not apply in this area.

Data out earlier this month showed overall Vancouver-area home sales fell nearly 40 percent year-to-year in October in the wake of the tax.

$1 = 1.3431 Canadian dollars Additional reporting by Andrea Hopkins in Ottawa; Editing by Marguerita Choy and Leslie Adler

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