Housing bubble still a tale of two cities

The reported 23% y/y decline in Vancouver home sales in August unsurprisingly prompted claims in the media last week that the new foreign buyer tax, which took effect at the start of last month, had a devastating impact on the local market. However, most of those media reports failed to mention that Vancouver home sales were down by an even bigger 27% y/y in July. The foreign buyer tax had very little impact on Vancouver home sales, which have been on a downward trend since February. That supports our claim that, rather than foreign buyers, it is irresponsible lending and rising domestic debt that has been driving Canada’s housing bubble.