OTTAWA—Canada is getting a clearer picture of the level of foreign cash in some of the hottest housing markets, adding more statistical fuel to the debate about how much influence foreign buyers have in driving prices to unimaginable heights, and what should be done about it.
The new housing statistics by Canada Mortgage and Housing Corp. (CMHC) and Statistics Canada shows that foreign buyers owned 3.4 percent of all residential properties in Toronto and 4.8 percent of residential properties in Vancouver.
The data also show foreign-owned homes are more expensive than those owned by Canadian residents.
Graham Haines, research and policy manager at the Ryerson City Building Institute, said the foreign buyer data hint at larger issues about speculation in the real estate sector, making it the canary in the coal mine of a growing affordability problem.
“What we’ve seen since 2010 is there is a lot more investment and speculation happening in the real estate market no matter where those people are coming from,” he said.
Which raises the question for policy makers: What to do now?
Experts are split.
Doug Porter, chief economist at BMO Financial Group, said the low proportion of foreign buyers nationally doesn’t mean their influence in the housing market is just as small. Even a small percentage of new buyers in a market that is already stretched can have large ripple effects, he said.
“These numbers, especially in Vancouver, might be a little bit lower than I might have guessed, [but] it’s still a very significant portion and to me this does show how foreign investors are a very big part in driving these markets.”
David Madani, senior Canada economist at Capital Economics, said the data suggest the influence of foreign buyers isn’t the primary driver of housing prices. More pressing is excessive mortgage credit from domestic banks and less-regulated non-bank lenders, as reflected in Canada’s high level of household debt, he said.
The data released was the first in a multi-year effort to create the most comprehensive database of homes and owners. The plan is to have data on some 5,000 municipalities by the end of 2022, with more data on sales and country of origin among other variables.
The two agencies found that foreign investors have an appetite for newer model condominium apartments in Toronto and Vancouver.
CMHC survey data showed that non-resident ownership rates hovered at 1.2 percent in Toronto and Vancouver in buildings built before 1990, but jumped to 4.3 percent in Vancouver for anything built between 2000 and 2009, and 4.1 percent in Toronto for anything built since 2010. That means those units may not be available for local residents in need of a home or rental unit, Haines said.
“It seems like a relatively small number, but when we talk about vacancy rate in the rental market, anything below 3 percent is a big deal,” he said.
And there are hints foreign buyers are finding new markets in which to invest, particularly Montreal. The CMHC survey found the city’s Nun’s Island had the largest increases in the share of non-resident owners over the last year, climbing from 4.3 percent in 2016 to 7.6 percent this year.
CMHC believes that part of the increase in Montreal overall could be related to investors trying to avoid the 15 percent foreign ownership tax in Toronto and Vancouver. Another explanation could be that new foreign investors see Montreal as an undervalued market ready to take off, Porter said.
Montreal Mayor Valerie Plante is now lobbying the Quebec government for the powers to tax foreign owners similar to Toronto and Vancouver.
“I’m not planning on putting a tax, I’m planning on getting the power from Quebec to create a tax if necessary. This is still in the plan,” she said.