Three weeks after the 15 per cent tax on foreign home buyers was introduced in Vancouver, Fitch Ratings says it leaves the housing market vulnerable to rising unemployment.
The report says that beyond cooling the market, data showing a slowdown in sales in the city suggest that, if unemployment was to rise, there could be a house price decline.
With Fitch calling for a 20 per cent overvaluation in the market, the decline in prices could be sizeable.
The scenario involves slowing sales - CREA has already reported a 21.5 per cent drop in Vancouver sales since February – and rising unemployment. That second factor is not an issue currently as Vancouver has seen strong growth in job creation, although other metros have seen a slower pace.
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