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Some observers have speculated that foreign investors will turn to Toronto’s real estate market after BC tacked a 15-per-cent tax on all non-residents purchasing homes in Metro Vancouver.

Recently, an economist who covers the Canadian housing market for one of the country’s preeminent banks looked at data suggesting the tide may already be turning.

“The million-dollar question now is whether foreign investment has shifted east and Toronto has become the new Vancouver,” writes Diana Petramala, an economist with TD Bank.

Record 2016 immigration and a growing first-time homebuyer population, which is the 25-to-34-year-old demographic, are supporting Toronto’s housing market, says Petramala – but there may be something else at play.

“The sales-to-population ratio in Toronto has risen sharply recently, suggesting that foreign investment and speculation are playing a part, albeit likely smaller than in Vancouver,” writes Petramala in a report.

“Over the long run, population should be the main driver of existing home sales. The ratio is a signal that sales are rising faster than population — meaning the rise in sales might be driven by something other than demographics,” Petramala explains in a followup email.

In a chart that Petramala provided to BuzzBuzzNews, the TD economist plotted the home sales-to-population ratios in Toronto and Vancouver to show they are moving in opposite directions.


The ratio of sales to population in Toronto (red) and Vancouver (blue.) Chart: TD Economics

Toronto’s sales-to-population ratio is now about 1.9, pushing considerably above the long-run average of roughly 1.6. Meanwhile, Vancouver’s ratio sits at 1.2, having dipped below its long-run average of 1.5, says Petramala.

There was a screeching slowdown in Vancouver home sales in August, the month the provincial government imposed its levy on nonresident homebuyers. Since then, activity has continued to moderate.

But something other than foreign buyers and speculation could explain the fact that the ratio of sales to population is climbing in Toronto, Petramala notes.

“You could argue that some pent-up demand accumulated between 2010 and 2014 when the ratios were below their long-run averages, and now some of that is being unleashed,” she adds.

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