Photo: James Bombales

Over the past two years, provincial governments have implemented foreign homebuyer taxes in Vancouver and Toronto, in an effort to cool their red hot housing markets. But according to one bank, foreign investors are flocking to a new city, and it’s not the one you’d expect.

“The Greater Toronto Area is no longer the housing market where foreign buyers hold the largest sway,” writes RBC senior economist Robert Hogue, in a recent note. “That title now goes to Ottawa.”

According to Hogue, while foreign buyer participation in the GTA fell from 5.9 per cent to 2.1 per cent over the last year, it rose from 2.1 per cent to 2.5 per cent in the Ottawa over the same period.

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Hogue writes that the GTA foreign buyer tax may have sent investors towards the Ottawa market, resulting in an uptick in activity.

“It’s likely that some foreign buyers have been attracted by Ottawa’s relative stability and good prospects,” he writes. “Yet it’s worth stressing that the uptick in foreign buyers’ involvement in the Ottawa market has been subtle.”

He notes that the slight uptick in Ottawa is significantly smaller than the jump in prices seen in Victoria, after the implementation of the Vancouver foreign buyer tax.

“Foreign buyers’ share of transactions in Victoria rose by one-third on average in the six months following the tax,” writes Hogue. “These developments clearly point toward some degree of foreign buyer diversion from Metro Vancouver to Victoria.”

But ultimately, Hogue is quick to point out that the amount of foreign buyer activity in Ontario is often exaggerated.

“When it comes to foreign buyers, there’s little to worry about at the moment,” he writes. “It’s never been clear to us that they posed a threat to housing markets across the country, though we clearly saw evidence that foreign buyers were a factor behind rapidly rising prices in certain pockets and market segments of the Vancouver and Toronto areas.”

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