Despite the fact that overseas investors seem to get the blame for “property hotspots” a report by the Toronto Real Estate Board (TREB) has cast a very interesting light on this subject. The poll, conducted in October, took feedback from 3500 TREB members who acted for buyers involved in 113,133 Toronto residential property transactions over the last year. So, if overseas investors are not pushing Toronto property prices what is?
Of the 113,133 Toronto residential real estate transactions conducted over the last year just 4.9% involved foreign buyers. This will surprise many people because politicians and real estate investors in Canada have been blaming overseas investors for the relatively high price of housing in the Toronto area. We saw a similar situation in Australia last year where the authorities conducted detailed research only to find that overseas investors had minimal impact on the market as a whole.
It would be foolish to suggest that overseas investors have not increased activity in the Toronto and Canadian real estate markets in general. In what many see as a flight to safety, real estate markets such as Canada have appeared on the radar of Chinese investors in particular. Indeed the authorities in areas such as Vancouver recently introduced an array of local regulations to reduce the number of overseas investors.
While domestic investors continue to focus on the Toronto real estate market it was interesting to learn that more than 50% of overseas buyers were acquiring property for themselves or family members. The idea that overseas investors are in it for a quick buck appears well wide of the mark and difficult to justify with the poll feedback.
Other interesting data from the survey shows that around 30% of transactions involving overseas buyers were for properties valued in excess of $1 million. Only 25% of all transactions involving overseas buyers were acquired as rental investments with the vast majority, as we touched on above, buying property so they could live in Canada. So, what is pushing the Toronto property market to unsustainable levels?
Lack of active listings
If you look at the number of properties listed for sale in December 2016 the figures was only 50% of that in December 2015. So, when you bear in mind increased demand (predominantly from local investors) and reduced supply it is inevitable that prices will be pushed higher with more competition per property for sale. The only possible good news on horizon is the fact that as prices continue to rise this may tempt more people to bank a profit on their real estate assets. Then again, once they sell their property where would they go?
If you take a step back and look at the situation from a distance, all of the time effort and money spent focusing on the impact of overseas investors has been time wasted. The authorities need to tackle the growing housing crisis, look at affordable housing and the best way to deflate what is fast becoming a property hotspot.