In August of 2016, the government of British Columbia enacted a 15% tax on Vancouver’s foreign homebuyers. Why? To curb the tremendous growth in housing costs. With the market placing homes around $2,000 per square foot, offerings were becoming increasingly unaffordable. On top of that, the properties were overwhelmingly being purchased for investment purposes, and therefore standing vacant for long swaths of time — a sticking point with developers and members of the community alike.
Before the tax, foreign buyers made up 13.2% of all home-buying activity in Vancouver; by the end of September, that number plummeted to 1.3%.[1] The B.C. government’s plan initially appeared to be working— but then thanks to loopholes in the law, investors seemed to rebound, at least in part.[2] Watching this uncertainty unfold, our eyes naturally turned to a new possible frontier for foreign buyers: Seattle.
EMERALD CITY EXPECTATIONS.
Less than 150 miles away, the Greater Seattle area offers much of the same appeal as its Canadian counterpart. Seattle itself is a cosmopolitan city situated right on the water, and Bellevue is already popular with foreign residents. In fact, right after the tax came into place, the area saw a 125% increase in overseas searches — more than any other American city.[3] It seems like a slam-dunk for a future sales boom … with just one, supremely significant drawback: There’s virtually no new development underway.
While Vancouver has been building on a steady pace for years, the Seattle condo market is entirely underserved. One compelling factor is that construction costs are climbing, while sales prices remain about half that of Vancouver (around $1,000 per square foot). Compounding that, apartment rental rates have remained astonishingly high. Since the ROI is great, current developers have had little incentive to build condos in recent years.
BETTING ON BELLEVUE.
Bellevue lies a mere six miles from downtown Seattle, but offers a world of opportunity for non-U.S. buyers. Not only is the population 39% foreign-born [4] (triple that of Seattle), but also a Microsoft-financed university known as The Global Innovation Exchange (GIX) is set to open in the Spring District later this year. It’s expected to draw some of the globe’s top tech talent and significant research funding, along with a healthy flood of student visas. This could mean purchases in Bellevue by foreign buyers would see far fewer vacancies than in Vancouver, an ideal outcome for both developers and residents hoping to cultivate a real sense of community.
FORECAST: OPTIMISTICALLY FOGGY.
The relative affordability of Seattle and Bellevue makes them unquestionably attractive options. But, if these cities’ development or infrastructure can’t answer the growing demand for more condominiums, what’s a motivated cash buyer to do? Vancouver might still be on the table, despite the tax appearing to have deterred foreign buyers for now. The initial decline could always be a blip. It’s still very early days, and those looking to buy are safely in the category of the uber-wealthy anyway.[5] What comes next is still unclear, but one thing seems certain: If you build it, they will come.
