Two Canadian cities have climbed into a top-10 list of markets for the most active luxury home sales as debate on the influence of foreign buyers continues to grow.
The two separate studies out Thursday looked at the luxury housing market in major Canadian cities, one found Toronto to be growing at the second fastest rate in the world while another found 24 per cent of realtors surveyed maintain that a quarter of the properties in their region were purchased by foreign buyers.
Christie’s International Real Estate found in its so-called luxury segment — defined as US$3 million or more — sales were up 48 per cent in Toronto from a year ago, placing the city just behind Aukland, New Zealand, on the list of 100 markets surveyed. Auckland activity was up 63 per cent from 2014 to 2015, while Victoria sales were up 45 per cent year over year.
Chris Kapches, chief executive of Chestnut Park Real Estate, said the cost of luxury housing is moving people out of the central parts of Toronto deep into surrounding areas.
“People are buying right in Collingwood and some of the peripheral villages that sprung up around there,” he said, referring to the town about 150 kilometres north of the city that is normally associated with waterfront cottage properties.
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Kapches says average prices in both Toronto and Vancouver are being pushed up by the luxury end of the market, as people who can’t afford in one segment of the market look elsewhere for property. Toronto’s real estate board reported this month that April prices for existing homes were up 16.2 per cent from a year ago, while Vancouver prices were up 25.3 per cent during the same period.
“To use a cliche, the tide is lifting all boats, as the luxury market goes and up and prices goes up, we are seeing a similar impact on properties that normally wouldn’t be deemed to be luxury but are gradually becoming more expensive,” Kapches said.
On the subject of foreign buyers, Kapches said his own anecdotal reports are that foreign buyers have been increasing substantially. “It’s more so than we have seen in the past,” he said.
A report from Royal LePage, which between Feb. 26 and March 9 polled 250 of its real estate advisers who specialize in luxury property across the country, found 66 per cent of advisers believe foreign investor activity is up in their regions. LePage’s survey found 67 per cent of advisers said luxury home sales have increased since January 2015.
“While the impact of foreign buying on Canada’s overall residential real estate market is small, we see it growing in importance in the luxury market,” said Phil Soper, chief executive of Royal LePage.
The LePage numbers come as the debate over foreign ownership continues to intensify with even the chief executive of Canada Mortgage and Housing Corp. Evan Siddall saying the country needs more data on its prevalence. In the March budget, Ottawa pledged $500,000 to Statistics Canada to study the issue, but critics have suggested that’s not nearly enough money for a study.
This week British Columbia Premier Christy Clark waded into the debate with reports saying she wanted more data from the federal government as her province begins to collect citizen data on sales.
Most of the focus has been on federal efforts to control the housing market in hot municipalities but Finn Poschmann, chief executive of Atlantic Provinces Economic Council, said any federal move in the market comes with consequences.
“The Bank of Canada could raise its interest rate and that would dampen the role of foreign buyers in the market and make life really hard for manufacturers and exporters and accommodation and tourism business. For every gain there is a loss,” he said, adding that you can see in real estate reports that the numbers break down on a regional basis. “When you are sitting somewhere else, it looks a whole lot different. You wouldn’t want the Bank of Canada to raise interest rates for markets that happen to be hot. Bubbles, where they exist, are always regional and always sectoral.”
He added that, if you are concerned about foreign buyers, that is purely provincial territory. Prince Edward Island has long restricted out-of-province buyers and that option is open to every provincial jurisdiction in the country.
“I have to tell you I’d be pretty ticked off (as a homeowner) if the pool of potential buyers was taken out of the market,” Poschmann said. About 70 per cent of households own, so any movement to curb prices negatively impacts more people than it helps, and Poschmann points out that the British Columbia premier has not yet moved to crack down on foreign buyers.
There are other provincial measures that can clearly impact housing and Bryan Tuckey, chief executive of Toronto-based Building Industry and Land Development Association, said rising prices in the city for detached homes come as Ontario considers expanding the greenbelt which could limit the amount of land to available for development.
“What it does from our prospective? It will mean more intensification, more condos, more cranes, more congestion, less housing choice and fewer ground-related pricing. It seems clear the government doesn’t seem to be concerned to be about the price of housing in the Greater Toronto Area,” Tuckey said.