What happens when prices rise so high that a chasm forms between bids and asks? The market grinds to a halt.

That's what happened in Vancouver housing in July, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 14.6% from June 2018, and a whopping 30.1% from one year ago. In fact, a total of only 2,070 transactions took place which was the fewest since the year 2000, as both buyers and sellers continue to sit on their hands amid confusion whether the recent price gains will continue or whether the housing bubble has burst.

Sales of detached properties in July was just 637, a decrease of 32.9% from the 949 recorded in July 2017, and the 1,079 apartment sold was a 26.5% drop compared compared to the 1,468 sales in July 2017.

And no, it's not seasonal: last month’s sales were 29.3% below the 10-year July sales average.

The reason for the collapse in transactions: the formerly all too willing buyers, mostly Chinese oligarchs who would use Vancouver real estate as their offshore Swiss bank account, have disappeared.

"With fewer buyers active in today’s market, we’re seeing less upward pressure on home prices across the region," Phil Moore, REBGV president said. "This is most pronounced in the detached home market, but demand in the townhome and apartment markets is also relenting from the more frenetic pace experienced over the last few years."

"Summer is traditionally a quieter time of year in real estate. This is particularly true this year," Moore added,

Curiously, despite the slowdown in the market, prices remained at nosebleed levels, suggesting that sellers are not in a rush to sell. Detached homes sold for an average of C$1.59 million, down 1.6% from a year ago, and apartments averaged C$700,055, up 13.6% from July 2017. The overall composite benchmark price fell just 0.6% in July to C$1.09 million, which is still up 6.7% from a year earlier, and remains unreachable for most ordinary buyers.

The report signals buyers are still adjusting to tougher mortgage qualification rules the federal government introduced Jan. 1, and more worryingly, to the four increases in the Bank of Canada’s trend-setting interest rate over the past year. Those rules were put in place after surging prices in both Toronto and the Pacific coast city led to warnings about excessive speculation.

"With increased mortgage rates and stricter lending requirements, buyers and sellers are opting to take a wait-and-see approach for the time being", Moore said.

Other levels of government have also cracked down. British Columbia’s provincial government imposed a tax on foreign buyers, and Vancouver is trying to deter property speculators with a levy on vacant homes.

So will prices catch up to the collapse in sales? According to the REBGV, for all property types, the sales-to-active listings ratio for July 2018 is 17.1%. By property type, the ratio is 9.9% for detached homes, 20.2 per cent for townhomes, and 27.3 per cent for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12% mark for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months.

In other words, with the surge in detached listings coupled with the lack of declining prices, all that Vancouver's real estate market needs is a spark that launches the selling deluge; however since the bulk of purchases were made "all cash", and in most cases sight unseen, it is unlikely that further monetary tightening will be the catalyst that finally pops one of the world's biggest housing bubbles.