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19 Dec

Foreign Ownership

General

Posted by: Bill Yeung

Much Ado About Almost Nothing–Non-Resident Ownership of Housing
May's employment growth builds on gains since July 2016

Statistics Canada in conjunction with Canada Mortgage and Housing Corporation (CMHC) released their first report this morning from the Canadian Housing Statistics Program (CHSP), providing data regarding the non-resident ownership of Canadian housing. This program was mandated by the last federal budget, filling in a significant data gap in housing statistics. For years, many have speculated that foreigners were the major culprits driving housing prices into nosebleed regions in Vancouver and Toronto. Today’s release shows that non-residents own less than five percent of housing in both cities.

Immigration remains a significant driver of housing activity in Canada. Canada has the most robust population growth in the G7, three-quarters of which is attributable to immigration and foreigners moving to Canada will be of growing importance in the future. But the report showed that non-residents – defined as both foreigners and Canadians whose principal residences are outside of Canada, irrespective of citizenship – are not the primary cause of the housing affordability problem in Canada’s two largest cities.

Many have blamed foreigners– mainly the Chinese–for the sky-high prices that have surged in the past three years–pricing many Millennials out of the housing market. A voter backlash spurred provincial governments to introduce a 15% tax on non-resident buyers in Vancouver (August 2016) and Toronto (April 2017), though earlier available data showed that foreign purchases were only between 5 and 10 percent of all home sales. In both regions, the tax slowed housing activity mainly by changing psychology. New listings surged, and buyers became more cautious as their options improved with more supply and lower prices. Other measures to slow housing activity by government and financial institution regulators have led many to assert that “boomers have priced millennials out of the housing market.”
Data revealed that non-residents (individuals whose principal dwelling is outside of Canada) owned 3.4% of all residential properties in the Toronto census metropolitan area (CMA), while the value of these homes accounted for 3.0% of the total residential property value in that metro area. In the Vancouver CMA, non-residents owned 4.8% of residential properties, accounting for 5.1% of total residential property value.
Estimates of non-resident ownership varied by property type. In both metropolitan areas, non-resident ownership was more prevalent for condominium-apartments. Non-residents owned 7.2% of condominium-apartments in the Toronto CMA and 7.9% of these units in the Vancouver CMA. By comparison, non-residents held 2.1% of single-detached houses in the Toronto CMA and 3.2% of single-detached homes in the Vancouver.
Over the past decade, home prices have accelerated markedly in Canada’s largest urban areas, particularly in Vancouver and Toronto. Data from the Canadian Real Estate Association Home Price Index show prices increased 173.7% in Vancouver from January 2005 to November 2017, while they rose 145.0% in Toronto over the same period. The last three years have been particularly telling, with house prices in Vancouver increasing by more than 60% and in Toronto by more than 40%, triggering great concern about housing affordability.
Below are two infographics produced by Statistics Canada giving more regional detail on non-resident ownership in Vancouver and Toronto. Breaking down the metro regions by municipalities, across the Vancouver CMA, non-resident ownership was most concentrated in the City of Vancouver (7.6%), followed by Richmond (7.5%) and West Vancouver (6.2%). In the Toronto CMA, the shares of non-resident owned properties were most substantial in the municipalities of Toronto (4.9%), followed by Richmond Hill (3.6%) and Markham (3.3%).
Largest Share of Non-Resident Ownership Is High-Price Condos
The most significant share of non-resident ownership in both CMAs was for condominiums, at 7.9% in the Vancouver and 7.2% in the Toronto. (See table below).
In Vancouver, almost two-thirds of non-resident owned properties were condominiums, while in Toronto, this share was close to half. Although the majority of condos were apartments, some were also single-detached houses, semi-detached houses and row houses.
Across the Vancouver CMA, 50.1% of condominium-apartments owned by non-residents were in the City of Vancouver, while 14.9% were in Richmond. In the Toronto CMA, non-resident owned condominium-apartments were primarily located in the City of Toronto (82.8%) and Mississauga (8.6%).
In the Vancouver CMA, the average value of a condominium-apartment owned by non-residents was 30.4% higher than that of a resident held condo-apartment. The City of Vancouver had the highest rate of non-resident ownership of condo-apartments within the CMA. The average value of these apartments was approximately $930,600, which was 25.6% higher than resident-owned.
The relative disparity between non-resident condo prices and resident condo prices in Toronto was much smaller than in Vancouver. In the Toronto CMA, non-resident owned condominium-apartments were on average 8.7% more expensive than resident owned. The City of Toronto had the highest concentration of non-resident owned condo-apartments in the CMA, which were on average valued at $439,000, or 7.6% more expensive than resident-owned.
Same is true for Non-Resident Owned Single-Family Homes–More Expensive Than Resident-Owned
For the Vancouver CMA, the average value of a single-detached house owned by non-residents was approximately $2.3 million compared with $1.6 million for resident held. These differences were most pronounced in the Greater Vancouver A subdivision, the City of Vancouver and West Vancouver. In Greater Vancouver A, single-detached houses owned by non-residents had an average value of nearly $8 million, while those owned by residents had an average value of $5.3 million. The average size of a single-detached house held by non-residents in this district was close to 4,800 square feet, 32.2% larger than the average size of single-detached dwellings owned by residents.
In the Toronto CMA, single-detached houses owned by non-residents were on average 12.3% or $103,500 more expensive than homes owned by residents. Differences in average values for single-detached dwellings were most marked in the municipalities of Markham, Richmond Hill and Toronto. In Markham, the average value of single-detached houses owned by non-residents was close to $1.1 million compared with $997,500 for resident owners. In Richmond Hill, non-resident held single-detached homes were, on average, valued at $1.2 million compared with $1.1 million for resident owned houses. In the City of Toronto, a non-resident owned single-detached house was, on average, valued at just over $1 million compared with $965,800 for a resident owned home. These differences, once again, are much smaller in the GTA than in the GVA.

Bottom Line: Non-residents represent a significantly more important factor in the Vancouver region than in the Toronto CMA, as expected. Moreover, non-residents purchase markedly more expensive properties compared to residents in Vancouver than in Toronto.
Wealthy Chinese nationals are a more significant factor in Vancouver than in Toronto, which has been the case for many years–not surprising given the geography. Moreover, many Chinese nationals began buying properties in the Vancouver CMA well in advance of the July 1997 handover of Hong Kong from the United Kingdom to China. Chinese have continued to find the Vancouver region an attractive haven for capital despite the imposition of capital controls in China.
Many are non-residents and have not rented their properties. In consequence, there are relatively more vacant properties in Vancouver than in Toronto. The Vancouver city council approved a tax on empty homes, the first of its kind in Canada, in early 2017, with the first payments due in 2018. Self-reporting owners will be assessed a one percent tax on homes that are not principal residences or aren’t rented for at least six months of the year. Though a similar tax has been discussed by the Toronto city council, to date, it has not had legs.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca