Is foreign ownership of real estate in Canada “destroying our cities and way of life,” as a new online petition claims, or is the impact minimal, accounting for less than four per cent of condo apartments in Vancouver and Toronto, for example, as the latest survey by Canada Mortgage and Housing Corp. (CMHC) indicates?
Most people say we just don’t know because we don’t have enough data.
“A lack of accurate and reliable data makes it difficult to determine if or how foreign ownership may be affecting housing markets,” says CMHC’s latest survey.
The online petition sums up how many people in the Vancouver area feel about the topic: “Offshore investment is taking over our city,” it says. “Wealthy overseas investors are using our real estate as a place to store their wealth. They consider our homes safer than a bank and are using them in lieu of… Many of these homes are being taken off the market and sit empty, thereby denying a home to a local family and driving up rents due to a reduced amount of housing stock available.”
The concern over foreign ownership is strongest in Vancouver but it’s also being expressed in Toronto. The two cities are the hottest real estate markets in Canada and both experienced record sales, and real estate prices, in 2015.
“Due to the difficulties of assessing various public and media claims, the paucity of official, empirical data has contributed to the contentious nature of this controversy,” says Kerry Sun in a report for the China Institute, University of Alberta. “Existing studies appear to show relatively low levels of foreign investment, concentrated in downtown Vancouver and in luxury properties, but their accuracy and reliability are hindered by methodologicial shortcomings related to the absence of detailed data.”
CMHC takes note of two studies that attracted a lot of media attention: a Sotheby’s report in 2013 that said international buyers accounted for 40 per cent of luxury home sales in Vancouver and 25 per cent in Toronto; and a study by Andy Yan, a adjunct professor at the University of British Columbia, which says about 65 per cent of luxury homes sold in three Vancouver neighbourhoods from August 2014 to February 2015 were sold to buyers with “non-anglicized Chinese names.”
CMHC says that while questions have been raised about the methodology and sample size for these studies, “they raise some interesting points that merit further research.” The federal housing agency says it “is working to identify and fill significant data gaps” in the information. In the meantime, the agency says its latest survey, which covers only condominium apartments, “is an important first step.”
It says, “One of the challenges associated with measuring foreign ownership is the definition of a foreign resident. For example, should immigrants and non-permanent residents who reside permanently in Canada be considered foreign residents?”
CMHC’s study defines a foreign resident as “a person whose primary residence is outside of Canada”, even if that person is Canadian.
It found that shares of foreign ownership in condo apartments ranged from zero per cent in Regina to 3.3 per cent in Toronto and 3.5 per cent in Vancouver.
The report says that although still low as a proportion of overall ownership, the percentages in both the Toronto and Vancouver “were higher in 2015 than the 2.4 per cent and 2.3 per cent (respectively) recorded in 2014, and the year-over-year changes were statistically significant.” Winnipeg saw foreign ownership jump from 0.1 per cent in 2014 to 2.7 per cent in 2015.
The petition calls for the limits on the purchase of homes by non-Canadian residents for income tax purposes and a special levy on these purchases.
Prime Minister Justin Trudeau told Global News that without “concrete data,” it would be risky to put limits on foreign ownership.
“You know you have to be cautious about decisions like that that are based on a single factor because at the same time (it) would potentially devalue the equity that a lot of people have in their homes right now,” he said. “We have to be very, very cautious about restricting foreign investment in our country at a time where we know we need foreign investment in business, in resource development.”
In the China Institute report, Sun says that “any effort to collect detailed information on foreign investment in Canadian real estate should consider the purposes that this information is intended to serve. Interest in this investment can focus on foreign ownership, capital, occupancy of residential property, or its effects on the supply of housing…It should be recognized that not all forms of foreign investment have the same consequences, whether beneficial or detrimental. More research is needed, for example, to investigate the supposed link between foreign investment and vacancy rates or property speculation in Canadian housing markets, which is thought to be a factor affecting housing affordability.”
CMHC says that to fill the data gaps on the subject, it is exploring ways to study the subject in collaboration with others in the housing industry. “This may mean surveying Realtors, builders and lenders, as well as working with municipal land registries and other levels of government.”
Written by Jim Adair