With housing prices at record highs in many parts of the country, most notably in Vancouver and Toronto where the average price of detached homes now exceeds $1.3 million and $1.2 million respectively, many buyers have had to consider condos as their “starter home.” But condos prices in those cities have also skyrocketed in recent years, and some blame foreign investors for the price hikes. The CMHC recently tried to calculate the impacts of foreign ownership on the Canadian condo market.
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Shiny and New
The CMHC data shows that foreign investors, for the most part, make up a fairly small portion of condo owners in Canada. Those that do buy here though are much more interested in newer properties. In the Toronto “census metropolitan area” foreign buyers own less than 2 per cent of condos built before 1990, but own 7 per cent of buildings constructed since 2010. In the City of Toronto itself – the North American leader in high rises under construction for several recent years, as many as 10 per cent of newer condo units are foreign owned.
The figures for Vancouver are similar, with less than 2 per cent of pre-1990 condos owned by foreign investors, but 6 per cent of newer ones held by overseas owners.
Outside of the two hottest real estate markets, foreign ownership seems to be largely inconsequential, with only 1.1 per cent of all condos regardless of construction date in Calgary foreign-owned, and Montreal at a similar rate of 1.3 per cent. In both those cities, the highest percentage of foreign ownership is in buildings constructed between 2000 and 2009, though in both cases still less than 2 per cent of the total. In Edmonton, Kelowna, Saskatoon, and Quebec City, the overall rate of foreign ownership is less than 1 per cent.
Why is Foreign Ownership a Problem?
Concern over foreigners owning real estate isn’t a xenophobic backlash against immigrants. After all, most Canadians take pride in the fact that we’re a multicultural country, not to mention that many of us are immigrants ourselves.
The big issue is younger Canadians being priced out of the real estate market. While property values have in some cases more than doubled in the last 10 to 15 years, wages have stagnated. As a result, every year it’s harder and harder for first-time buyers to save up enough for a down payment on a property they can afford to live in.
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The low Canadian dollar and the country’s reputation as politically stable and economically sound make it an enticing place to invest, driving up demand – and prices – in the hottest markets.
Fewer Owner-Occupied Homes
There are also other related concerns. For one, in order to earn money off their investments, non-resident owners will rent out their condos. Owners within those buildings who are responsible for the maintenance of the facilities and long-term capital costs (through their monthly condo fees) resent transient residents who use – and may abuse – the amenities, without any long-term financial commitment.
In the case of houses purchased as investments, many overseas buyers leave them vacant so they have a place to stay during occasional visits to Canada, resulting in some Vancouver neighbourhoods becoming virtual ghost towns.