Photo: James Bombales
In the past two years, Toronto and Vancouver have both introduced foreign buyer taxes, amidst worry that foreign investment was driving up home prices in the two red hot housing markets.
And while non-resident ownership across all property types was just 4.8 and 3.4 per cent in Vancouver and Toronto, respectively, last year, it’s long been speculated by industry watchers that the myth of excessive foreign investment drove up home prices in 2017.
Now, according to a new survey from the Canada Mortgage and Housing Corporation (CMHC), that appears to have been the case.
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“Sixty-eight per cent of respondents in Vancouver believe foreign investors have a lot of influence in driving up home prices while 48 per cent of respondents in Toronto believe foreign investors have a lot of influence driving up home prices,” reads the report.
At the same time, 48 per cent of buyers in both Vancouver and Toronto reported spending more than they budgeted on their home purchase last year, while 55 per cent reported experiencing a bidding war.
Buyers who purchased a single-detached home and experienced a bidding war in Toronto and Montréal spent a premium of $125,000 and $55,000, respectively, on their home purchase.
“The survey allows us to better understand how home buying is influenced by attitudes and perceptions, giving rise to sustaining local narratives,” writes CMHC analytics housing research senior manager Guillaume Neault, in a statement. “As we can see, psychological drivers can be at odds with economic fundamental drivers.”
While many buyers perceived foreign investment as the cause of high prices, the CMHC writes that in both Toronto and Vancouver supply constraints and demand side factors are the key variables behind rapid price growth.
“What is striking is the significant gap between perceptions of the public and available data, so much so that the perception of non-resident ownership takes centre stage when discussing the drivers of price growth,” reads the report.