TD Bank recently released a comprehensive report focusing on various hot button real estate issues, including the influence foreign buyers have on major markets such as Toronto, Vancouver, and Montreal.
The bank claims the share of foreign buyers is now better understood than it was before.
“The B.C. government started tracking foreign buyers in 2016. They found that between June 10-July 14 of that year, 9.7% of all sales transactions in the Greater Vancouver Area were tied to foreign nationals,” TD Economists Beata Caranci and Diana Petramala wrote in their latest report. “That number plummeted to 1% following the non-resident tax implementation in August, but recovered to near-4% by the end of 2016. Ontario started tracking the share of foreign buyers in total transactions in May of this year and found that figure to be 4.7% in the Greater Golden Horseshoe region (GGH).”
According to the economists, Ontario failed to start collecting data until after the province released its latest policy announcement, which included a foreign buyer tax; as a result, it may have underestimated the influence foreign buyers have on certain markets.
“In addition, although a figure like 5% may not sound material, it can certainly create tension within a market that is already facing tight supply, by making hot markets even hotter,” the economists wrote. “Lastly, non-resident purchases were not uniformly distributed across the geography. Within the GGH, the York region and the City of Toronto reflected foreign purchase shares much higher at 9% and 7%, respectively.”
Following Ontario’s implementation of a foreign buyer tax, many pundits argued other major markets outside the province would experience upticks in foreign purchases.
However, that has not been the case according to Caranci and Petramala.
“Ottawa and Montreal have heated up in recent months, but they are not yet exhibiting the typical signs of increased foreign investment activity, including a significant jump in the share of sales relative to the size of the population,” they wrote. “Moreover, the Quebec Federation of Real Estate has noted that the strength in Montreal has been driven by the $400,000 and under segment of the market, while the luxury home market has remained amply supplied. In other words, the segment of the market most attractive to first-time homebuyers is driving market activity and price growth.”
The government has perhaps its best understanding of just how influential foreign buyers are on Canada’s hottest markets, according to one big bank.