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Housing markets under pressure from increase in foreign buyers
Wednesday, February 07, 2018
The growing numbers of non-permanent residents who are working or studying in Canada on temporary visas are having an impact on the real estate markets in major cities such as Vancouver and Toronto.
A new report from Canada Mortgage and Housing Corp. shows nonpermanent residents accounted for 3.9 per cent of new mortgages provided in 2016 in Vancouver, an increase from 3.3 per cent in 2014.
They accounted for 2.7 per cent of new mortgages in Toronto, up from 2 per cent in 2014, and 2.9 per cent in Edmonton, a slight decline from 2.8 per cent two years earlier.
The report uses data obtained from Canada's five largest banks on their mortgage lending trends in the prior three years in five major census metropolitan areas, which encompass cities and their surrounding suburban communities.
The report also shows non-permanent residents, who are typically in Canada on temporary work or study visas, accounted for 2.4 per cent of new mortgages in 2016 in Calgary and 1.9 per cent in Montreal.
The study supplements data released in December by Statistics Canada on foreign buying in real estate, which looked at purchasers who lived outside of Canada at the time they bought properties in this country. It used a different methodology that relied on property ownership data. Among its findings, the December report showed non-residents owned 7.6 per cent of homes in the city of Vancouver, and 4.9 per cent of properties in the city of Toronto.
Tuesday's report studied nonpermanent residents who lived inside Canada at the time of purchase. CMHC said it wanted to clarify the effects on real estate demand as the population of non-permanent residents has climbed.
There were almost 760,000 non-permanent residents in Canada in 2015, a 93-per-cent increase from 2003, while the general population grew just 13 per cent in the same period.
The boost in international students has been a big factor in the increase, with their numbers doubling in 10 years to 353,355 in 2015 from 181,176 in 2006. Ontario accounted for half the growth, the report said, with the population of foreign students in Toronto climbing 146 per cent over the 10-year period.
Toronto also saw the greatest increase in the proportion of new mortgages going to nonpermanent residents in recent years, climbing from 2 per cent in 2014 to 2.9 per cent by 2016.
While they represent just a fraction of the total population, non-permanent residents have a larger influence in urban centres and in younger age groups, CMHC said. In Vancouver, 20 per cent of total population growth from 2004 to 2015 came from the increase in non-permanent residents.
Non-permanent residents also account for a larger proportion of buyers in younger age categories, CMHC added.
Among people aged 18 to 44, non-permanent residents accounted for 4.7 per cent of new mortgages in Vancouver in 2016 and 3.4 per cent in Toronto.
For those under age 25, nonpermanent residents received nearly 10 per cent of mortgages issued in Vancouver and Toronto in 2016, which suggests the younger demographic is likely receiving support from parents to buy their homes.
CMHC said the values of properties purchased by nonpermanent residents tended to be more expensive, partly because of the neighbourhoods where they live. In Toronto, for example, the average detached house purchased by non-permanent residents cost $1,088,477 in 2016 compared with $901,938 for permanent residents. In Vancouver the average was $1,652,596 in 2016 compared with $1,422,277 for permanent residents, CMHC said.
As a proportion of all mortgages outstanding, non-permanent residents accounted for 2.6 per cent of mortgages in Vancouver in 2016 and 1.1 per cent in Toronto, CMHC said.
Provincial governments in B.C. and Ontario have introduced 15-per-cent foreignbuyers taxes in recent years, but non-permanent residents are affected differently in the two provinces.
Many non-permanent residents living in the Toronto region are eligible to have the tax rebated if they can show they were in full-time education for two years after buying a property or working full time under a valid work permit for a year after the purchase. The B.C. program, meanwhile, provides fewer exemptions, offering a rebate for people who become permanent residents within a year of purchase.
Non-residents owned 4.9 per cent of properties in Toronto in December, according to Statistics Canada data.
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