Photo: James Bombales
Last April, a 15 per cent GTA foreign buyer tax sent sales activity and foreign investment plummeting. But according to Chinese real estate website Juwai.com, the market could be warming up.
“After the new foreign buyers tax kicked in, Chinese demand dropped like a bowling ball, but now that ball may be bouncing,” writes Juwai.com CEO Carrie Law, in a statement.
According to Law, Chinese buyer inquiries halved in the two months after the tax was imposed, and hit a low point in January. But over the last two months, activity has been moving upwards.
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“Whether this upward trend continues for a third month, we don’t yet know,” she writes. “We expect a significant recovery in Chinese buying by year’s end, although not to the levels of April last year.”
Law writes that a pattern has emerged in other markets that have chosen to introduce a foreign buyers tax — investment drops off shortly in the short term, but but tends to fully recover in the long term.
“While we don’t expect Chinese offshore buying to recover to prior levels this year in Toronto, we do expect it to recover above the levels seen in the immediate aftermath of the tax’s imposition,” she writes.
Law notes that while the tax is unlikely to discourage those planning to live in Canada, it has cut down on the level of property investors.
“We…see purely investment-oriented buyers taking longer to make transactions in Toronto or deciding against it entirely,” she writes.
But Law also says that foreign buyers have less of an impact on the GTA housing market than many pundits might think. She points to the new mortgage stress test as the cause of the recent drop in GTA home sales.
“The [new mortgage stress test] will get to the heart of the cause of the property boom, which is cheap and easy credit,” she writes. “When rates are low and credit flows, prices go up. It’s the first thing every university student learns about the housing market, and it has nothing to do with foreign buyers.”