Photo: James Bombales
Industry watchers love to debate how much foreign buyers have a role to play in Canada’s hottest housing markets. But according to one bank CEO, Canadians should say “no thank you” to foreign investment in real estate.
“We do not need foreign capital using Canadian real estate as a piggy bank,” said RBC CEO David McKay at a conference on Tuesday. “If capital is coming in to sit in a home, unproductively, and is distorting your marketplace and the livelihood of your residents — no thank you.”
According to McKay, foreign money has been “gasoline” on hot markets like Toronto and Vancouver, which have seen prices rise in recent years. He identified a “cocktail of factors” that helped to boost prices, including a booming population, land constraints, a lack of supply and historically low interest rates.
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But just how much are foreign buyers affecting the Canadian housing market? According to many experts, it’s extremely hard to say.
Foreign buyers accounted for less than 5 per cent of housing in the GTA and GVA in 2016, according to a joint report from Statistics Canada and the Canada Mortgage and Housing Corporation (CMHC), released late last year.
“The phenomena of [foreign-buyer] ownership is most pronounced for condo apartments,” said CMHC chief economist Bob Dugan, at the time. “But what we’re seeing is that the share of condos owned by [foreign buyers] remains low and stable.”
But according to Urbanation VP Shaun Hildebrand, that data may not tell the whole story.
“I think it’s important to point out that this likely isn’t capturing all foreign households,” he told BuzzBuzzNews. “There are ways of masking foreign ownership that these studies can’t account for, and that’s why it’s important to keep monitoring these numbers.”
Hildebrand also noted that it’s worth questioning what foreign buyers are doing with their investments. “Are they holding onto them, or are they buying and flipping them quickly?” he says. “This could help to shed some light on the situation. The numbers don’t sound particularly high, but they aren’t insignificant.”
And while both the BC and Ontario governments have implemented foreign buyer taxes in the last two years — in August 2016 and April 2017, for the GVA and the GTA, respectively — it’s worth noting that after temporary price dips, home prices have been moving steadily upwards in both markets for months.
“Foreign buyers are just a straw man for a country that refuses to recognize that cheap credit for local investors is the real reason prices are rising,” wrote Juwai.com CEO Carrie Law, in a statement late last year. “There has always been one fundamental truth in the housing market: access to cheap loans drives up prices.”