According to a recent report from Royal Bank of Canada (RBC), foreign buyers now make a stronger impact in Ottawa compared to the Greater Toronto Area (GTA), though Vancouver and Victoria remain the top spots for non-resident speculators.
It’s important to note that foreign buyers in the GTA and Ottawa never really made a significant impact on the market, which is why the foreign buyers tax was slightly confusing when announced as part of Ontario’s Fair Housing Plan.
From April to May 2017, foreign buyer participation was at just 4.7% in Ontario. In the GTA, foreign buyer share was a bit higher at 5.9%. According to real estate transactions between November 2017 and February 2018, foreign buyer participation dropped to 1.6% in Ontario and 2.1% in the GTA.
During the same time period, foreign buyers became more active in Ottawa, increasing from 2.1% share to 2.5%.
That said, RBC points out that this isn’t necessarily foreign buyers rushing to Ottawa because of the high prices in the GTA. The increase in activity is so small that Ottawa could have seen this increase whether or not the GTA saw a dip.
While it’s unclear whether or not foreign buyers are targeting Ottawa instead of the GTA, it is clear that the GTA took a hit from the non-resident speculator tax.
We should also note that comparing April-May levels to November-February is kind of odd considering the typical buying seasons. Spring is always busier than the winter when it comes to sales, but foreign buyer activity may not be affected by the seasons as much as domestic activity.
Even with foreign buyer participation dropping to 2.1% in the GTA, it’s still not much to consider. This drop in activity hasn’t lowered prices or created much more supply.
Where we may see positive benefits is in the psychological impact. Domestic homebuyers will hear that the Fair Housing Plan has helped decrease the amount of foreign buyers in the GTA, and it may boost consumer confidence.
But, we don’t necessarily believe there are a ton of buyers out there who are putting off buying a home because they think foreign buyers are snatching up all the available homes.
If you were hoping the decreased activity from foreign buyers in the GTA would lower prices, we hate to break it to you…
The Building Industry and Land Development Association (BILD) recently released its new home market figures for March 2018, and reported the benchmark price for a new single-family home in the GTA was still above $1.2 million and the benchmark price for a new condo unit jumped nearly 40% year-over-year to more than $740,000.