As if Seattle housing wasn’t expensive enough, new money may be flowing in.
Increase demand. Keep supply the same. You already know what that will to do to prices. There may be a new source of demand for Seattle and Eastside houses.
Everyone’s watching Seattle’s real estate market. Buyers and sellers are trying to see if the market is growing or cooling. Thanks to a tax in Vancouver, BC, prices here may have only just begun to climb because our houses are considered affordable. While that sounds strange from inside Seattle, it may look obvious from outside.
Earlier this summer, Vancouver passed a “Foreign Buyers Tax”. Housing was becoming unaffordable, possibly because foreign buyers were converting cash into real estate as a hedge against uncertainties in their local economies. Buy a house, rent it or not, and hold it for the long term as an investment. Vancouver’s mayor imposed a 15% tax to curb the rise and hopefully make housing more affordable for residents. The effect was dramatic. As we reported earlier, sales in some Vancouver neighborhoods dropped 20% in one month even while the rest of the province stayed the same.
We also speculated that, rather than seeing a similar drop here, we might see a rise. It looks like that may be happening.
Seattle’s market has been so strong because business here is so strong. There’s been some speculation; but, most of the housing price growth has been from job growth. While we see it as an affordability crisis; relative to the rest of the Pacific Rim, Seattle is affordable. Relatively.
Realogics/Sotheby’s dove deep into our region’s data and found some insights as well as anecdotes.
“Juwai.com buying enquiries to Seattle increased by 143 percent in August 2016, compared to one year earlier. Meanwhile buying enquiries to Vancouver dropped by 81 percent during the same period, with all of that drop concentrated in the premium end of the market.” – RSIR
Seattle is one part of the story, but the Eastside is appealing, too.
“By most accounts, Mainland Chinese buyers, together with existing Chinese residents now account for 30 to 50 percent of the luxury home sales in many popular Eastside neighborhoods. “ – RSIR
Look to high-end homes and find many are being bought by trusts, ostensibly to hide the identity of individuals. There’s an incentive to invest more than $500,000: an improved chance at eventual citizenship. That minimum then becomes a reason to only shop for the more expensive properties, which Seattle and King County now have in greater supply.
On the list of least affordable cities, it is no surprise to find Vancouver and the Bay area cities. They’ve been far more expensive than Seattle for years. Vancouver got a boost after Hong Kong reverted to Chinese control. The Bay area has Silicon Valley, which also attracted foreign investors. Seattle, therefore, is relatively affordable.
“In August 2016, the median home price of a detached home in the Seattle/Bellevue metro area was $670,000, an increase of 9.8 percent year-over-year. By comparison, median prices in San Francisco at $1,106,400 and in Vancouver at $1,214,250 were higher than Seattle by 65.1 percent and 81.2 percent, respectively.“ – RSIR
Supply and demand and other economic pressures would suggest more interest in Seattle even without Vancouver’s tax. With similar geographic constraints, relatively favorable taxes, and a foundation of a healthy business economy, Seattle has the potential to rise to similar heights especially with the increased demand. Our advantages are one reason the Wall Street Journal wondered if Seattle is the new San Francisco.
If it happens here, we have the others are guides and examples. Sellers can take the money and run, and may have to if they can’t afford to buy here. If homes are bought but not occupied, supply decreases which increases prices. As more residents move farther out, traffic and mass transit shift, and prices in the surrounding counties add to the rise they’re already experiencing. Or, it may not happen here; and whatever reason we haven’t attracted the attention of foreign buyers may continue to dissuade them.
One sign of the environment, RSIR is producing an encore printing of Seattle Luxury Living – the all-Mandarin edition.
- Seattle: Is It Vancouver Deja Vu? [RSIR]
- Seattle is the New San Francisco [CS]
- What will Vancouver’s housing market implosion do to Seattle? [CS]