When house prices climbed to astronomical heights in the winter of 2017 (the time when some open houses attracted over 300 people a day and buyers paid $100,000 or more over-asking for modest and dated detached homes), concerned residents and policy makers rushed to pinpoint what was driving the frenzy.
One popular theory? That foreign speculators and investors were driving up home prices by purchasing massive chunks of low and high-rise real estate in major Canadian cities (namely Toronto and Vancouver and their respective satellite cities) and leaving them vacant while waiting for them to appreciate.
But although the Ontario government did manage to cool the market in the spring by proposing a 15 per cent Non-Resident Speculation Tax (NRST) on foreign buyers and speculators, the new policy was met with skepticism by real estate organizations who claimed foreign ownership in major markets is actually pretty low–something recent data is supporting.
New data recently released by the Canada Mortgage and Housing Corporation (CMHC) indicates that the share of condos owned by non-residents remains low in the cities the corporation surveyed, with the majority reporting shares of less than one per cent.
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The CMHC also pointed out that non-resident ownership shares remained stable in Vancouver and Toronto, while Montreal saw an increase.
As for how many units are owned by non-residents in Toronto proper, data says the largest structures registered a non-resident ownership share of 4.2 per cent compared to the overall share of 2.5 per cent. As far as the overall GTA goes (which, of course, includes Brampton), foreign ownership shares sit at 2.3 per cent.
That said, it does appear that foreign ownership is dropping in Ontario in particular (so perhaps the province was onto something with its policy initiatives).
The province recently released Ontario specific data on non-resident ownership and says that individuals who are not citizens or permanent residents of Canada, as well as foreign corporations, accounted for 1.9 per cent of home purchases across the Greater Golden Horseshoe (GGH) region from Aug. 19 to Nov. 17, 2017.
This is down from 3.2 per cent from the previous collection period.
The province says that, in Toronto in particular, 3.8 per cent of transactions were made by foreign buyers–down from 5.6 per cent in the previous period.
At this juncture, it’s safe to speculate that Ontario’s Fair Housing Plan, announced in April 2017, managed to discourage some foreign investors from purchasing Ontario properties (even though they might not have been purchasing a huge share to begin with).
According to the Ontario government, the province’s housing plan was developed to make housing more affordable for both homebuyers and renters and bring stability to the real estate market.
This plan included the aforementioned tax to “help address unsustainable housing demand in the GGH, while ensuring Ontario continues to be a place that welcomes all new residents. Individuals who are not citizens or permanent residents of Canada, as well as foreign corporations, that purchase or acquire homes in the GGH may be subject to the NRST.”
But while home prices are expected to continue to climb in 2018, it is important to note that prices in the low-rise market (detached, semi and town) have decreased month over month (what goes up must come down) since their unprecedented high in winter 2017.
The Toronto Real Estate Board reported GTA home resales in November 2017 declined 13.3 per cent while the average selling price decreased by two per cent, both from a year earlier.
On the other hand, the Canadian Real Estate Association reports that Ontario home resales increased 7.7 per cent in November 2017 from the previous month while average prices rose 0.7 per cent.
The Multiple Listing Service Housing Price Index for the GTA was 8.4 per cent higher in November compared to a year earlier.
And while there are less non-resident buyers, some are still interested in the Ontario market.
The province says Ontario collected approximately $133 million in NRST from April 21 to Nov. 17, adding that the money collected may be subject to rebates and refunds that could significantly reduce its net total.
So there you have it–housing is and will remain costly, but not necessarily because of an influx of foreign buyers. It remains to be seen how housing prices will respond to new government policies going forward.
2018 could be an interesting year.