Photo: Amy Thibodeau/Flickr
Chinese buyers are opting for more conventional homes in Canada’s top real estate markets instead of the nation’s most luxurious homes, according to a Juwai.com and Sotheby’s International Realty International Home Buyer Insights report released today.
The report attempts to dispel the assumption that foreign buyers are more interested in investing in high-end real estate, as the majority of properties being viewed on Juwai.com, a Chinese international property website, by Chinese enquirers were below $655,050 in 2016.
Juwai.com and Sotheby’s, a real estate brokerage for Canadian luxury homes, created the report to provide insight into data collected in 2016 from Chinese property enquirers, looking for homes in Canada’s top markets: Toronto, Vancouver, Calgary and Montreal.
In 2016, conventional real estate was in demand, as 57 per cent of property enquiries below the listing price of $655,050 were in Vancouver, 67 per cent were in Calgary and 68 per cent were in Toronto and Montreal.
Last year, the median price of Juwai.com property enquiries prospective Chinese buyers researched was $590,200 in Vancouver, $531,115 in Calgary, $458,928 in Toronto and $488,012 in Montreal.
The report says the median price for Juwai.com property enquirers were in line with or sometimes below the average sale price of residential real estate sold within each market last year.
Behind the United States and Australia, Canada is the third most-searched market for Juwai.com property enquirers, with Toronto currently ranking as the top Canadian city of interest.
Chinese investment in Canada’s housing market this year is expected to mirror 2016 numbers, says Juwai.com CEO Charles Pittar.
“There is no firm data, but National Bank of Canada hypothesizes that Chinese invest around $38 billion annually in Canadian property,” says Pittar.
“That’s a tremendous boon for the country and is more than double the $16.4 billion annual value of Canada’s number one export to China, agricultural products,” he adds.
Despite common belief, the majority of Chinese buyers are not buying Canadian real estate as a financial investment. Instead, education and personal use are the primary motivators, argues the report.
Education was the top reason for why Chinese property enquirers were looking to buy in Toronto, Vancouver and Montreal, cited by 41 per cent, 44 per cent and 46 per cent of enquirers, respectively.
The next biggest motivator for investing in the Canadian housing market was “own use,” with 37 per cent of enquirers for Toronto, 25 per cent for Vancouver and 34 per cent for Montreal.
For Calgary, “own use” was the top reason why Chinese property enquirers checked out real estate in the city, with 62 per cent of enquires citing this reason.
Overall, immigration ranked as the lowest motivator for property enquirers in Calgary, Montreal, Toronto and Vancouver with 3 per cent, 10 per cent, 13 per cent and 14 per cent, respectively.
With the introduction of the BC government’s foreign-buyer tax in Metro Vancouver in August 2016, the region saw an immediate effect in its housing market enquiries, according to the report.
When the tax was announced in July 2016, Vancouver home enquiries fell 81 per cent year-over-year and 88 per cent year-over-year in August, says the report.
Juwai.com notes that Chinese property enquirers immediately resorted to other major Canadian markets once the tax took effect.
Enquiries in Calgary soared 1,050 per cent year-over-year in August and 420 per cent year-over-year during September. In Toronto, enquiries increased 62 per cent and 72 per cent year-over-year in August and September, respectively.
In the third quarter of 2016, when the tax was implemented, Juwai.com property enquiries for Vancouver dropped 67 per cent year-over-year, but subsequently experienced an uptick in the fourth quarter with an 18 per cent year-over-year increase.
Going forward, Sotheby’s predicts that, regardless of the foreign buyer tax, most foreign investors with personal use motivations will continue to make real estate buying decisions based on lifestyle choices.
The implementation of the foreign buyer tax didn’t have as much of an effect on luxury real estate as it did for the conventional real estate market, says the report.
For foreign luxury homebuyers overall, financial security, enhanced lifestyle and premier education were the main reasons for home purchase decisions in Canada’s largest real estate markets, says Sotheby’s.
In years to come, the report says the desire for a better lifestyle and educational opportunities are expected to remain primary motivations for Chinese buyers in Canada.