This piece represents the opinion of Zillow Chief Economist Dr. Svenja Gudell.

Vancouver, British Columbia

I’ve been asked a lot lately: Will Vancouver’s new 15 percent tax on non-Canadian buyers of local real estate push more foreign buyers to consider Seattle-area real estate instead? I understand the concern, but I think in practice, these fears are likely overblown.

Vancouver’s law is designed to ease mounting housing affordability concerns in Canada’s fastest-growing major city. The demand for housing in Vancouver is far outstripping the supply of homes available to rent or buy. Vancouver’s rental vacancy rate is less than 1 percent – essentially, less than 1 percent of the area’s stock of rental homes are actually without tenants and available to lease. In a popular, growing city attracting new residents by the day, that’s not nearly enough housing.

Economics 101 tells us that when demand exceeds supply, prices go up – and housing is no exception. This is a problem that’s probably all-too-familiar for many Seattleites looking for a home, but frustrated by intense competition. Compounding the problem in Vancouver is a large number of foreign buyers attracted to Vancouver for any number of reasons that can’t help but add to this demand. Over the past few years, the share of home purchases made by non-Canadians in the Vancouver metro has been roughly 5 percent (though some have argued this figure may be two or three times higher than official estimates because nationality is largely self-reported and savvy buyers can skirt some disclosure rules). In the larger province of British Columbia as a whole, the share is about 3 percent.

Vancouver’s law is still young, and it will take many more months to fully see its true impact on the local market. But early returns suggest, at least on the surface, that it is having some impact. Overall sales in Vancouver were down dramatically after the introduction of the new tax. But this sharp drop-off is probably more attributable to timing and overall market conditions than anything else. Knowing the looming deadline, it is likely many foreign buyers pushed their timelines forward to make sure they closed their purchases before being subjected to the tax. This would push up sales in earlier months that may have closed later, creating the appearance of a big drop off that’s unlikely to be repeated in coming months. Additionally, sales and home prices overall were beginning to flag in Vancouver months before the new tax came into effect – a result of a rapidly growing market potentially becoming too expensive for many would-be buyers and therefore, slowing down.

Turning to Seattle, it’s natural to wonder if foreign buyers shut out of Vancouver or unwilling to pay the steep tax will turn their eyes 150 miles south and consider Seattle as an alternative. But again, it’s important to keep a few things in mind. First, foreign buyers typically buy more expensive homes than more traditional, domestic buyers. This means that even if some international buyers are pushed south, they very likely won’t be interested in purchasing a typical Seattle home and competing with local Seattle buyers. Instead, they’ll be looking at higher-priced, more luxurious homes – a smaller niche in which modest increased demand is unlikely to spill over into the broader market overall.

Second, and more importantly, it’s probably not safe to assume that foreign buyers are as mobile or flexible as the first fear suggests. Yes, foreign buyers may have more money to spend, but that doesn’t mean they want to or can just spend it as easily in one country as another. Many of these buyers are looking to purchase in Vancouver over Seattle in the first place for deeply personal reasons – perhaps they have business, education or family connections there, or are attracted by certain Canada-specific policies around immigration or trade.

Additionally, foreign buyers’ money may simply go farther in Canada than it does in the U.S., given the strength of the American dollar against its Canadian counterpart. Thus, it’s far more likely these buyers will consider buying a home in another Canadian city, and/or consider buying a less-expensive home in Vancouver, long before considering buying in Seattle or another U.S. market.

Given all of these considerations, it seems unlikely that Seattle will see a large increase of foreign buyers closed out of the Vancouver market. There may be some that leak through largely because of the new tax up north, of course. But these more flexible buyers will most likely be concentrated on the high side of the market, and will not significantly contribute to Seattle’s own intensely competitive local market, nor to mounting housing affordability woes.