Only 4.7 percent of the total number of homes sold in the Greater Toronto Area (GTA) were purchased by foreign buyers, according to new information released by the Ontario government Tuesday.
This figure is based upon the number of home sales that took place between April 24 and May 26, 2017 in the Greater Golden Horseshoe Region, the most densely populated and industrialized region in Canada.
This is the first time the provincial government has actual, concrete statistics on the number of non-Canadian citizens or residents that are purchasing homes in Toronto.
The only other official data on foreign ownership previously made public to Canadians was from the Canada Mortgage and Housing Corporation — an April 2016 report by the CMHC pegged the share of foreign ownership in Toronto as less than two percent for buildings completed before 1990, and seven percent for newer constructions completed since 2010.
The 4.7 percent figure sheds new light on the factors that have contributed to a sharp rise in home prices in the GTA, especially over the last two years. Home prices in Toronto reached their peak in March 2017, when the Toronto Real Estate Board released data pegging the home price increase at an absurd 33 percent — or $200,000 — from the year before.
On April 20, the Ontario government slapped a 15 percent tax on all home purchases made by foreign buyers in an attempt to dissuade the practice of purchasing property as an investment, rather than a place to reside. That rule however, largely assumes that a notable proportion of people buying homes in Toronto are foreign, and not Canadian investors.
It is hard to determine how significant the 4.7 percent figure is to the overall housing market without knowing the dollar value of those home purchases. Indeed, if they were hypothetically luxury homes in the $2-5 million range, the foreign buyer impact on the market would be of consequence.
Moreover, keep in mind that these purchases took place AFTER the imposition of the foreign buyers tax, potentially indicating that the number of foreign purchases of homes when home prices were at their peak, exceeded five percent.
Since Ontario introduced its Fair Housing Plan, a 16-pronged approach to tackle housing affordability in Toronto, home prices have dropped by roughly six percent and very little movement has been taking place in the housing market.
From a buyers point of view, there is no hurry to buy, because Toronto has peaked, and this is apparently the beginning of the Great Crash. Sellers, on the other hand, are keen to sell while they can, to get the highest possible price given the expectation of a slowdown.
What will likely happen will be a measured, temporary slowdown. “We expect the sharp drop in home resales that occurred since the Plan’s announcement in April to be largely sustained, even though we believe that the effect of the Plan itself will be temporary, perhaps six to nine months,” according to a housing report released by RBC Economics on Tuesday.
Vancouver imposed a foreign buyers tax of 15 percent back in August 2016, and saw an immediate slowdown in their market. Home prices in Vancouver, however, started picking back up in February 2017, indicating an adjustment from the perspective of buyers towards the province’s policy changes.