It looks like the figures from the Toronto Real Estate Board (TREB) were accurate; according to their survey conducted in the fall of 2016, foreign buyers in the Greater Toronto Area (GTA) accounted for 4.9% of transactions. The province just released data stating that only 4.7% of May 2017’s real estate transactions involved foreign buyers.
From April 24 to May 26, less than 5% of the 18,282 sales in Toronto and Golden Horseshoe area involved non-Canadians. The province’s 15% “non-resident speculation tax” came into effect on April 20, 2017.
It’s unclear whether or not the tax had anything to do with the amount of foreign investment, but it seems unlikely that TREB and the province would report similar numbers half a year apart.
Talk of the foreign buyers tax in Ontario has been around for a while. Now that it’s in place and the foreign buyer activity is at a level that is exactly what the industry expected, more than ever, people are starting to question its purpose.
Earlier this year, we chatted with four industry experts about their concern regarding the foreign buyers tax.
Barbara Lawlor, President and CEO of Baker Real Estate Incorporated said, “At Baker Real Estate Incorporated, the number of condos we see sold to foreign buyers is in the 5% range, and I suspect that number is even lower across Canada. Remember, most foreign buyers are end-users – and we also have speculators who are not foreign. Why place so much emphasis on this segment?”
And Ben Myers, Senior VP, Market Research & Analytics, Fortress Real Developments, said “A foreign buyers tax is like putting a Band-Aid on a stab wound. It would help, but it wouldn’t fundamentally address the problem, which in this case is a lack of supply.”
Now that everyone has confirmation that foreign buyers account for less than 5% of real estate transactions, perhaps more time, money, and resources can be spent on figuring out ways to increase new home supply.
Yes, new home supply saw a little jump in May 2017, but prices still increased significantly year-over-year. As of the end of May, there were just 1,400 new low-rise homes available across the GTA.
Tim Hudak, the head of the Ontario Real Estate Association (OREA), says that the best way to increase supply is to build more townhomes, stacked flats, and mid-rise residential buildings.
We’ve already seen a shift to this type of housing over the last couple years. Will we finally see planners, municipalities, builders, and developers all working together to make increasing new home supply a priority?