Toronto and Vancouver real estate have a relatively small number of homes owned by non-residents, a.k.a. foreign buyers. Numbers from Statistics Canada show that foreign ownership of Toronto and Vancouver real estate, were well below the double digit numbers people were expecting. However, surface analysis is next to useless – and has a tendency to understates the issue. These numbers need a little unpacking to understand how distribution of these buyers plays a more significant role than most government officials are willing to admit. Today we’ll take a brief look at the disproportionate impact foreign buyers have on “affordable” housing.
Toronto Real Estate
Toronto’s foreign buyers own more affordable properties, relatively speaking of course. In Toronto CMA, the median value of a resident’s home is $590,000. The median value of a non-resident’s home in the Toronto CMA is only $513,000, more than 13% lower than a typical resident. This trend is even more pronounced in the City of Toronto.
In the city of Toronto, the gap between resident and non-resident home value is even more pronounced. Residents of Toronto have a median home value of $583,000. The median value of a non-resident home is $492,000, 15.6% lower than a typical resident. This shows that non-residents are scooping up more affordable units in Toronto.
Source: Statistics Canada.
Vancouver Real Estate
This has long been a complaint of locals in Vancouver, and the data dump from Statistics Canada confirms it. Residents in Vancouver CMA have a median home value of $820,000. Non-residents have a median home value of $751,000, 8.41% lower than a typical resident. Once again, this trend is more pronounced in the city.
The City of Vancouver has an even bigger gap between residents and non-residents. Residents have a median home value of $1,245,600. Non-residents have a median home value of $905,000, which is over 27% lower than a typical resident. Can’t spend the median value that residents are buying at? You’ll have to compete with more than half of non-residents.
Foreign Ownership Is Low… If You Don’t Understand The Issue
The media paraded a number of real estate agents that felt non-resident numbers were way too low to have a significant impact. Unfortunately, these agents fail to understand statistical distribution, and the speed at which the issue evolved. Understanding how the data came to be is very important. Ownership as a percentage of total stock seems low, but the speed at which it evolved is the real issue here.
Non-resident ownership of total stock isn’t that impressive of a number by itself. In the Toronto CMA, non-residents owned 3.3% of the total housing stock. In the City of Toronto, it rises over a point to 4.8%. In Vancouver CMA, non-residents own 4.7% of the total housing stock. In the City of Vancouver, it rises to 7.6%, a pretty big jump. While these numbers don’t seem all that big, you need to think, how quick did this market share evolve?
Residents of Toronto and Vancouver have been buying housing stock in their city for as long as the city has been around. Global reports have been showing that non-resident ownership only took off around 2015. Huge amounts of capital outflows poured out of a few countries, with a significant amount landing in global real estate markets. Canada didn’t begin tracking this until the end of 2016, but there’s hints that show this is a recent issue. For example, condo distribution in Toronto, and Vancouver show that foreign buyers were heavily concentrated in new builds.
Source: Statistics Canada.
A heavier distribution of foreign buyers into newer, and cheaper homes isn’t an issue your grandparents have to worry about — it’s an issue that younger, first-time buyers should be concerned with. Typically younger buyers get into the market in lower priced starter homes. If these lower priced properties are being purchased by foreign buyers, young Canadians are going to have to wait even longer to get into the market. We’ll be breaking down this data even further over the next few days, to give a better sense of the issue.
Like this post? Like us on Facebook for the next one in your feed.
Very good point that distribution is an important factor. If non-resident ownership only became significant in Toronto after China’s capital controls, then that’s a lot of buying to get to even 3%.
Keep in mind Ontario only started tracking after China’s capital controls were locked down. Our foolish country only started to think it was a big issue, after the country where the money was coming from took action to stop the money from leaving. We’re an international joke right now, along with Australia and New Zealand. At least New Zealand is trying to fix it though.
These numbers also don’t capture the number that come here, get a PR card, and move back abroad. These are non-resident buyers that we just suck at measuring. The real numbers is probably closer to 40% in Vancouver.
Exceptional work Daniela and BD team! This is why I enjoy reading your posts! Keep up the good work
[…] Dwellings has (betterdwelling.com) has cleverly pointed out that the foreign buyers tend to buy more affordable units. As shown […]
Regardless of the distribution, it’s a low percentage. Unless there is data that shows otherwise.
For the sake of argument let’s say the 3.3% is concentrated strictly in condos. So what? Torontonians still have access to 96% of condos, let alone houses.
This also doesn’t explain why prices in detached homes have skyrocketed.
Herd mentality must play a role. Let’s say these non resident buyers bid for a home at new highs. 3.3% of home buyers doing this is enough to get prices consistently higher if local buyers are psychologically enticed to follow the new prices on similar properties. This can go on for a while. I remember a few years back when the a newspaper wrote about how a student from China whose parents bought a house at 30% above market values at the time. Well a price was set and sellers demanded similar prices. Buyers were will to pay up.
Tommy, it is a percentage of the total housing; let’s say that only 1% non-residents were homeowners in 2015. Now, what do you think happened since 2015 to make this number tripled? ;P … it would be interesting to look at the ratio of non-resident buyers to resident buyers YOY, but I have the feeling that it all comes down to money laundering and a loophole in exposing the secret owners of shadowy businesses aka beneficial owner. When we will have recession or/and the baby boomers will sell their properties; who will snap it?
Each year only a small fraction of Vancouver’s total homes go up for sale. For example maybe 4% of all housing. (not sure) If Vancouver’s foreign buyers only owned say 1% of all housing the first year and 3% of all housing the next year, that means that foreign buyers bought 50% of all housing that was for sale in that year!
Exactly. It’s akin the confusion people seem to have about the difference between income and disposable income.
Whatever the cause, and however counter-intuitive it may seem, some small change of percentage points in something(s) has resulted in the cost of houses more than doubling with virtually no increase in medium incomes.
The catalyst is of course interest rates. The question is who and how has been in a position to, and taken, advantage of it.
Any objections that government shouldn’t “meddle” in the real estate markets is preposterous and hypocritical.
Government meddling is the reason interest rates are so low.
I can confirm with my own eyes that over 80% of the downtown pre-construction sales have been sold to Asian buyers this fall. Peter Adelaide, Panda, E2, & etc. I do not know what % of them are foreigners but they were all Asian and a majority of them were Chinese. I asked my Chinese client why this is so? Her answer… Foreign Buyer’s Tax. They are buying pre-construction because in 4-5 years they should have their PR or citizenship status figured out by then to avoid the tax. Too bad for the “investors” who have bought into this hype I’m very skeptical how they will carry $900 + per sqft. At $900 per sqft at 3.5% interest 25 year Amort and 25% down you’ll need to carry about $4.42 per sqft. Current lease rates are about $3.80. They better hope that interest rates stay at current levels and rental prices shoot up to this level. At $4.42 a 500 sqft condo will rent for $2,210.
[…] Foreign Buyers Apply Pressure To “Affordable” Housing In Toronto And Vancouver […]
Why do we not focus on the issue? Too many people want the music to not stop, unfortunately, the pain will be greater the longer the music plays ( we allow prices to become further extended from incomes ). If we do not have enough housing they why do we not stop or limit immigration? This issue is going to result in a disaster like the US and bring down some banks and government financing and our dollar if we do not do something.
Its plain and simple. Restrict property ownership to those citizens born in this country. Anyone doesn’t like it, then tell them love it or leave it.