Foreign-buyer home purchases dropping in Toronto region

Theglobeandmail.com
Dec. 20, 2017
By Jill Mahoney

Foreign buyers have purchased fewer homes in the Toronto region in recent months, according to new figures from the Ontario government.

The province also revealed how much money has flowed into its coffers from its 15-per-cent tax on international residential purchases: about $133-million in six months.

However, the government warned the figure could drop "significantly" because some buyers may eventually claim rebates.

In all, 3.8 per cent of homes sold in the city of Toronto were to buyers who were not citizens or permanent residents between mid-August and mid-November, down from 5.6 per cent for the previous three-month period.

In the wider Greater Golden Horseshoe region, 1.9 per cent of residential properties were bought by people from abroad, down from 3.2 per cent.

The government's data come amid continued debate over the role of international capital in the Toronto area's real estate market.

Some analysts and home buyers believe wealthy foreign buyers are pushing prices beyond the reach of many local residents, while the real-estate industry argues the main challenge is strong demand and a shortage of housing supply, rather than small numbers of non-citizens.

Foreign purchases began to fall in the vast area around Toronto after Premier Kathleen Wynne's government introduced its tax in April, according to Finance Ministry figures. Before the move, the real estate market appeared to be overheating, as average home prices soared to nearly $1-million in the Greater Toronto Area. After the tax, the market entered a downturn.

The government on Wednesday said the overall housing market "continues to show stable growth," while noting that Greater Toronto Area home resales fell 13.3 per cent and the average price dropped by 2 per cent last month from November, 2016.

"Our balanced measures introduced as part of Ontario's Fair Housing Plan are having the desired effect on the residential real estate market," Finance Minister Charles Sousa said in a statement, referring to the government's spring package of housing policy changes aimed at cooling the Toronto area market.

Real estate agents who work with foreign buyers said many are waiting out the market's turbulence.

"[The tax] forced everybody to the sidelines for no other reason than psychological because it was new and they wanted to see what kind of an effect a government intervention like that was having," said Jim Burtnick, a Toronto broker who works with international clients. "People want to make sure that they're not catching a falling knife, that the sky's not falling, and once they realize fundamentally nothing's changed and everything's pretty stable, I think you'll see that it'll pick up again."

Mr. Burtnick said foreign investment could also be down because some buyers are finding ways to avoid paying the tax, such as by registering properties in the names of relatives who are Canadian citizens or permanent residents. "People are generally pretty resourceful," he said.

Peter Kwan, a broker based in Markham, a community in York Region that has traditionally had the Toronto area's largest percentage of foreign buyers, said locals and non-Canadians alike are "sitting on the fence now waiting for luck, waiting for further price reductions."

The government's figures show that 3.9 per cent of recent home sales in York Region were to international buyers, down from 6.9 per cent earlier this year.

In its first such disclosure, the Ontario government said it had collected $132.6-million in tax revenues on 1,080 purchases by foreign citizens from April to November in the Greater Golden Horseshoe, which spans from Niagara to Peterborough, or an average of $123,000 a transaction.

But the province noted the figure may dwindle because non-citizen home buyers can apply for rebates if they later become permanent residents, full-time students or work full-time on a valid permit.

The government also released the rate of international property transactions for the rest of the province, saying 1.6 per cent involved at least one foreign entity, whether an individual or corporation, from mid-August to mid-November. Ontario's overall rate was 1.8 per cent.

Statistics Canada reported on Tuesday that non-residents owned 4.9 per cent of properties in Toronto and 3.4 per cent in the larger region.

The report also found non-residents owned 7.6 per cent of all homes in the city of Vancouver and 4.8 per cent in the wider region.

The B.C. government introduced a 15-per-cent tax on international purchases of homes in the Vancouver area in August, 2016.