There has been a lot of media splash and excitement recently about the real estate market in the Metro Vancouver area.

Stories abound over the market being severely affected by the recent 15% tax on foreign buyers. This tax did indeed have a temporary effect on prices for homes in the greater Vancouver area, and had a much more significant impact on areas such as Surrey, where in some examples we saw a 15% drop in sale prices (not that significant in the big picture).

Sellers and buyers held a “wait and see” stance for about a 30-day period. Once that period passed, the amount of homes on the market decreased, which in turn lowered inventory, leading to prices stabilizing and being close to the previous levels. This tax only applies to residential homes, so foreign buyers shifted their attention to commercial buildings, which has created an increase in pricing and low inventory in this space where properties are exempt.

The fundamental topographical location of the Metro Vancouver area with ocean to the west and mountains to the east creates a fundamental shortage of quality development sites. Standing inventory has historically not been able to keep up with demand as is the case with many urban centers in North America.

This fundamental force is unlikely to change in this area unless in-migration drops off significantly. B.C. is in the top four regions in Canada in terms of population growth. The difference is only a few percentage points from Manitoba and Saskatchewan, with Alberta topping the list. This shows that B.C. still has very strong in-migration to drive strong demand.

A recent condo development in Metro Vancouver was announced and sold out in less than two weeks with 85% of those buyers being local buyers, showing that the local demand far exceeds the foreign-buyer pool.

These local and foreign buyers are starting to look to the suburbs of Vancouver, driving up prices as far away as Kelowna, which has seen strong year over year gains. Foreign buyers are often looking for a way to extricate their investment capital from their home nations. With limited options, they will continue to look at real estate in stable, safe, western areas such as Canada to invest their capital. Accounts from the front lines tell of builders and renovation-based companies alike fighting it out voraciously in bidding wars on properties, showing that the heat is still on in this market and there will still be plenty of money to me made in this region for some time to come. This is in stark contrast to what I call “common knowledge” reports by those not in the real estate business.