Over the past few years, home prices have skyrocketed around Vancouver, B.C., in part because of a large number of foreign buyers.
Now the city and the province have instituted measures to tamp down foreign demand.
Real estate experts say that will likely prod more foreign buyers to look at real estate in Seattle.
And that could have a ripple impact in Snohomish County.
The benchmark home price climbed to $1.2 million in the Vancouver metro area this summer.
That’s a 71-percent increase in just three years.
So the B.C. government instituted a 15-percent tax on anyone buying a home in Vancouver who is not a Canadian citizen or permanent resident.
“While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure on a market struggling to build enough new homes to keep up.” B.C. Finance Minister Michael de Jong said, in a statement. “This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”
The number of real estate transactions involving foreign buyers all but stopped.
The city of Vancouver is also instituting a tax on people who own homes in the city who don’t live in them or rent them for most of the year.
That tax goes into effect in January.
Vancouver Mayor Gregor Robertson told Bloomberg news that there are 20,000 empty or under-occupied properties in the city.
In mid-November, he reported that the residential rental vacancy rate was around 0.6 percent.
“It’s almost like they’re using Canadian real estate as a bank; put it in there and watch your net worth grow,” said Bliss Goldstein, a Bellingham Windermere real estate agent, who has been watching the Vancouver market.
It’s just a matter of time before those buyers come down to the Seattle metro area, if they haven’t already, said Peter Orser, director of the University of Washington’s Runstad Center for Real Estate Studies.
“Logically, we will see an impact,” he said. Figuring out the extent to which it is happening will be difficult to do, however.
New demand for housing is created all the time in the Seattle area.
Pinning down exactly how much of the increased demand is coming from overseas investors is tricky.
“You’re going to see it on the title — you’ll get a sense of it from that — you’ll see if from the stories the real estate community tells about their customers,” he said. “And you’ll see it in terms of price.”
King County has suffered from housing supply issues for a while now; as of October, the Northwest Multiple Listing Service reported that the county had just 1.12 months of inventory.
The median home price in King County was $495,500, up 14.50 percent over October 2015.
Many foreign buyers are buying houses in Bellevue and on the Eastside.
Anna Riley is a Windermere real estate agent who specializes in sales in Bellevue. She’s seen an uptick in foreign buyers in the last three years, and even more this year.
Last year, around half of her listings were bought by international buyers. This year, she said it’s about two-thirds.
“We have more foreign buyers who seem to be coming down from Vancouver,” she said.
Between the foreign buyer tax and the vacant house tax, Riley said potential buyers are dissuaded from purchasing in Vancouver.
“It’s sending a very clear message that Vancouver is a more expensive place to buy and that Seattle is friendlier to international buyers,” she said.
Of those international buyers, she said, about an equal number of them are looking to move to the area, looking for a vacation home and looking to diversify their assets and don’t intend to live there.
The new buyers moving to the area have helped create a diverse international community in Bellevue, Riley said.
“Right now the positives vastly outweigh the potential negatives,” she said. “On the Eastside we’re doing a really good job of creating a community with a more vibrant population.”
It’s a matter of balance, encouraging this international population while making sure housing prices stay affordable for everyone, she said.
The median home price on the Eastside was $665,900 as of October, and the area has just one month of inventory.
While places like Bellevue and Seattle could be feeling an immediate impact, there’s little risk of direct foreign investment outside of the Seattle metro area, Orser said.
“They will invest where there is the highest return and the lowest risk, which would be closest to the job centers,” he said.
Instead, a ripple effect can start in Seattle and spread to Snohomish County as well as other counties.
“Prices are being pushed pretty high,” said David Maider, the designated broker/owner of the South Everett Windermere office. “We do see buyers that are choosing Snohomish County over King County right now.”
People are choosing to commute into Seattle, and willing to drive in from as far out as Mount Vernon to find more affordable properties, Maider said.
In counties further out, real estate agents are getting inquiries from people looking to retire and young families who are getting priced out of Seattle.
That creates a ripple effect of its own, said Goldstein, the Bellingham real estate agent.
“What are they going to do for jobs? There’s also pressure on the job market here as well,” she said.
Retirees who sell out in the higher Seattle market can sometimes put down cash offers in surrounding counties. That can cause problems for buyers when there are multiple offers on a home.
“The winners are the people with the money and the losers are the people without,” she said.