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There’s a housing bubble in Vancouver but it’s not caused by foreign buyers, says a note out Friday from Capital Economics.

Paul Ashworth, chief North American economist with Capital Economics, said media reports showing a decline in housing sales in Vancouver following the implementation of a new tax on foreign buyers is missing a key part of the story.

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Sales were down 26 per cent in August, 2016 from a year earlier — a decline that coincides with an additional 15 per cent property transfer tax on foreign buyers that was announced July 25 and took effect Aug. 2. Some in the real estate industry said July sales were boosted by foreign buyers moving transactions forward to avoid the tax.

“Most of those media reports failed to mention that Vancouver home sales were down by an even bigger 27 per cent year over year in July,” said Ashworth. “The foreign buyer tax had very little impact on Vancouver home sales, which have been on a downward trend since February. That supports our claim that, rather than foreign buyers, it is irresponsible lending and rising domestic debt that has been driving Canada’s housing bubble.”