Canada

Foreign Ownership of Toronto and Vancouver Condos Is Larger Than You Think

Foreign Ownership of Toronto and Vancouver Condos Is Larger Than You Think

Condo pre-sales in Toronto and Vancouver have been targeting non-resident buyers overseas for years. Although not a secret, we never really had an idea of how large the segment of the market is. Even transfer data from the Ministry of Finance aggregates, and dilutes the impact by spreading it across the entire market. New numbers from Statistics Canada finally sheds some light on the issue. Non-residents play a huge role in the development of condos, even keeping up to 1 in 5 units through the completion of the building.

Supply, Assignments, and Flippers

Most of us have never had the pleasure of developing a condo, but it turns out it’s pretty hard. Securing financing for a large number of units requires finding enough people that can pay a deposit of up to 20% of the sticker price. These aren’t easy to find from regular buyers, since 20% of a condo in Toronto or Vancouver is actually a huge wad of cash. Securing funding from both domestic and overseas speculators becomes the most efficient option.

Usually the “investors” flip the assignment before the building registers (a.k.a. completes), especially if they’re an overseas buyer. If they hold it through registration, they’re subject to that pesky non-resident sale tax (NRST). However, if they sell it before, they make a tidy little profit and don’t have to pay a NRST. Some buyers keep it through completion, hoping the price will rise even further before selling it. These buyers that chose to keep it through completion are the ones we can find in Statistics Canada data. Even numbers excluding those that flip, will highlight just how much Canada’s wacky market depends on foreign money.

1 In 10 New Toronto Condos Are Owned By Non-Residents

More than 1 in 10 recently completed condos in Toronto are held by non-residents. Non-residents, for those that don’t know, are people that declare their primary home in another country. Isolating condo apartments constructed between 2016 and 2017, we find that non-residents own 11.32% in the Toronto Census Metropolitan Area (CMA). In the City of Toronto, that rate of non-resident ownership is just a teensy bit higher at 11.65%. Remember, these are just the non-residents that kept the assignment through completion. It also excludes any resident speculators, which are by no means scarce.

Source: Statistics Canada.

1 In 5 New Vancouver Condos Are Owned By Non-Residents

The king of non-resident ownership still retains its crown. Non-residents own 15.54% of condos completed from 2016 to 2017 in Vancouver CMA. That number gets even higher if you isolate the two largest cities in the CMA, City of Vancouver and Richmond. Non-residents in the City of Vancouver own 19.14% of condo apartments competed during that period. In the Chinese-Canadian suburb of Richmond, that number is an even higher 23.69%. That’s almost a fifth of condos used as a second home or kept empty.

Source: Statistics Canada.

It can’t be stressed enough that these are just the non-resident owners. There’s likely a significant portion of domestic investors that are playing a similar role. Making it harder and less profitable for non-residents to buy a home is a popular method for attempting to tackle this issue, but it doesn’t solve the domestic speculator problem. It just gives domestic investors a competitive edge. A more comprehensive strategy for tackling the issue, without elevating one type of speculator over another needs to be found.

We know, you have *no* idea what to get us for Christmas. Why not donate some cash to the Ontario SPCA or the BC SPCA instead? Every dollar helps!

Photo: Nick Harris.

Discuss On Facebook

12 Comments

  • Reply
    #ItsSpeculationStupid 5 months ago

    Which is what we’ve been saying in Vancouver for years, the government is just catching up. Most of the next construction is bought by local and foreign speculators. I estimate almost half of all units are being sold to “investors,” which shows we don’t have a supply issue in Canada. We have a speculator issue.

  • Reply
    Trader Jim 5 months ago

    Wonder where all of the people that were saying new Toronto towers weren’t filled with empty units? Conspiracy theorists is what people that complained about empty condos being flipped, after being held empty for years.

    Now that the government’s confirmed these numbers , they must be in a hole scrambling with PR people to build a new fairy tale to tell.

    • Reply
      Ham 5 months ago

      Jim, did I miss something from the article? I just want to understand how you connected these dots – these numbers to units being held empty.

      I am tracking couple of units that doesn’t seem to have anyone living in. But that’s just my anecdotal evidence.

  • Reply
    Michael Z. 5 months ago

    Basically the new supply is only for investors? That’s a good way to create a housing crisis.

  • Reply
    Yu 5 months ago

    Speculators or not. If locals can’t afford to buy at pre-sale prices, it doesn’t matter. Developers aren’t being greedy, locals are paying a premium for someone to secure interim financing of their building. Locals want to solve the problem, they need to start making more money.

    • Reply
      Enough of this.. 5 months ago

      Well said from a freeloading elitist mind.

      Considering the current extreme of the matter, foreign ownership must be banned.

      Or, at the very least, if income tax is non existent, property tax ought to be 10x with fully transparent transactional detail. Identity of buyer made public with source of funds vigorously vetted. The traditional immigrant that has been coming to Canada throughout its history is being disenfranchised by this appalling negligence consciously performed by leadership in finance/banking along with government. I won’t even touch national security implications.

      This country has been passified with greed based on artificial asset acceleration and when that ride stops (IT ALWAYS DOES), this complacency will have to answer to the next generation where the burden of todays ignorance is swallowed whole.

      Realistically and unfortunately, the die is cast.

      Based on Yu comment, I’d like to take this opportunity to thank all “speculators” for their endearing act of public service in facilitating dev financing for the poor locals who need to make more money.

      Buckle up my friends.

      This is our legacy..

    • Reply
      bluetheimpala 5 months ago

      Your understanding of the issue is quite simplistic. Yes honey bun, if everyone just ‘made more money’ then we could all afford whatever. Ferrari Thursdays? Yes please!

  • Reply
    Todd 5 months ago

    People should also remember that people buy a pre-sale unit 3-5 years before completion. This is representative of 2011 – 2013 demand for these units. Can you imagine how high these numbers are going to be for sales that happened during the 2015 – 2016 peak of capital outflows from China? These numbers are going to get even bigger, as we get delayed demand presented to us.

  • Reply
    Allen 5 months ago

    Key to this report was the word Non – Resident, not ”foreign“ as the title leads you to think. I am a non – resident Canadian living overseas and I own two condos. One was my residence before I was relocated overseas. Add that in to all the snowbirds that own multiple properties and this number really inflates. On top of that…..Most younger canadians that moved in from Asia live in a home that their parents bought for them years ago. So yes, foreign owned but lived in by the owners Canadian family.

    • Reply
      Ham 5 months ago

      Do you keep both of your properties tenanted?

      Do you hold one of these properties for speculative purposes? It really doesn’t matter if the owner is Canadian non-resident or foreign nationals if they behave the same way. I am pretty confident they do behave similarly.

  • Reply
    Foreign Buyers Apply Pressure To “Affordable” Housing In Toronto and Vancouver | Better Dwelling 5 months ago

    […] 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. […]

Leave a Reply

Your email address will not be published. Required fields are marked *