Frustrated would-be Canadian home buyers, priced out of their desired neighbourhoods, have long pointed to the invisible force of foreign investment as the impetus behind skyrocketing prices. Now, the Canada Mortgage and Housing Corporation (CMHC) is revealed to be taking a closer look, reports Bloomberg News. Via a freedom of information request, the news outlet has learned the CMHC has been in contact with at least eight government agencies to find data on offshore buyers in cities with the hottest real estate markets, including Toronto, Vancouver and Montreal. But will these efforts reveal an accurate assessment of the situation?
Why the Sudden Focus?
Canada’s housing market has been soaring for a better part of the last decade – even during the 2008 financial crisis, when American real estate experienced a meltdown. Throughout it all, Canadian market prices persevered. But now, as the average cost in Vancouver and Toronto tops the million mark, there are calls to understand where the money is coming from. Is it truly driven by low interest rates, or is there another force at play?
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In the past, the CMHC has estimated that 3.5 per cent of the market is represented by foreign buyers, but those findings are widely viewed as low-balled, as it struggled to find the resources to effectively track foreign investment. Karine LeBlanc, spokesperson at CMHC, was recently quoted as saying, “At this time, no existing tool can provide a definitive measure of the level of foreign investment in Canada’s housing markets.” Leblanc added, “That said, CMHC regularly engages in discussions internally, as well as with industry experts, as part of its continued efforts to develop a program of work that would better capture data on foreign buyers.”
Still No Proof
The little data that does exist on foreign ownership was collected by the CMHC in December 2014. It looked at foreign ownership of rental properties. Based on a semi-annual survey of rental stock, in 11 major Canadian markets, the results showed that 2.4 per cent of rental property in Toronto was foreign-owned and only 2.3 per cent in Vancouver was in the hands on non-residents. In some centres it was as low as one-tenth of a percentage point. From this perspective there is no real proof that foreign real estate investors are playing any significant role in pushing up prices.
In Search of the Truth
Despite this, late last year, CMHC President Evan Siddall said data collection on foreign investment was one of his priorities. In November of 2015 he said “Accurate and reliable” figures, not just anecdotes, would help the agency gauge risk and instability. Now, a new report by the City of Vancouver shows high vacancy rates in condominiums could also be to blame for the out of control pries. While only one per cent of single-family homes are vacant in Vancouver right now, there is a 12.5-per cent of non-occupancy rate in condominiums. The city says 10,800 homes are lying empty the vast majority of these seem to be condominiums. Steps are being taken to see how these homes can be occupied to curb Vancouver’s growing problem of unaffordable housing.
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Until there is a reliable tool and extensive data collected on foreign investment in Canada, it’s safe to say that it is low interest rates, not foreign investment, that continue to drive Canada’s real estate market. With the Bank of Canada announcing that its holding its key interest rates steady at 0.5 per cent, home buyers may be further encourage to borrow more to get into their dream home, causing prices to soar even higher.