The most hotly debated topic on the Toronto real estate scene is the true impact that foreign investors have on the market. Are they really driving prices up? They don’t think so, and they don’t want you to think so either.
It’s easy to feel that way, in such a competitive market. You work hard to find a Realtor in Toronto, you make your bid, and you lose out to the foreign investor. It can be frustrating. The whole process can really leave you feeling sour, and lead you to think that they’re eating into the Toronto’s supply of homes for sale, and perhaps even bringing up the prices.
But let’s take a closer look at foreign investors’ real impact on the Toronto real estate market.
Foreign Investors and Toronto Real Estate: Fact vs. Fiction
There is a popular idea these days that foreign investors are swooping in and taking all the good properties. However, a recent study from Urbanisation recently reported that foreign buyers, (With their primary residence being outside Canada) made up only five percent of the sales of new units in condo buildings.
They also found that:
Canadian investors who don’t plan on living in the unit made up 52 percent of the sales
The remaining 43 percent of new condos sold in the Toronto area went to locals who plan to live in the properties
At the same time, Canada Mortgage and Housing Corp reported that only 3.3 per cent of Toronto condos are owned by foreigners. The CBC also recently reported that:
According, the recent survey of Toronto-area real estate agents, domestic investors now make up 25 percent of their client base
Overall, in Toronto home prices jumped 21 percent from a year ago and now average $762,975.
The Recent Rule Changes and Foreign Investors
Foreign investors were recently dealt a rule change that makes it harder for them to invest in Canada, from afar.
In October, it was announced that foreign investors could no longer utilize a tax loophole that helped some to avoid paying capital gains taxes as their homes appreciated in value. Now, however, buyers who were not residents at the time a home was bought will no longer be able to claim a principal residence exemption.
Finance Minister Bill Morneau announced the changes without calling out foreign investors by name and said all of the new rules (which included implementing mortgage stress tests for all insured borrowers as well ) are in the name of making sure Canada’s housing market remains stable and affordable for Canadian buyers.
Not All Foreign Investors are Looking to “Flip” a House
A lot of foreign investors want to fight the belief that they’re just sitting back from afar, and are going to just turn around and sell the property for a profit.
Peter Walsh and his wife own three houses and two condos, and rent them to people they claim may not be able to get quality housing from most landlords or property owners.
“What I feel we’ve done is perhaps help people,” Walsh told the CBC.
“I can justify it to myself in saying I don’t think I’m hosting anybody or demanding excessive rents.”
He even accepted a painting from one of his tenants who makes their living as an artist, as a way of helping with the rent.
So if you’re trying to find a Realtor in Toronto, be sure to ask them if they have a strategy when bidding against investors (be it foreign or domestic). You should also make sure they have a history of winning bids.