January 2, 2018
On December 19, 2017, Statistics Canada, in partnership with the Canada Mortgage and Housing Corporation, released the first report in a series that will develop a framework to address gaps in in Canadian housing availability and affordability. This first report contradicts the Canadian perception that low availability and inaffordability of residential housing in the Toronto and Vancouver Census Metropolitan Areas (CMAs) is due to high degree of foreign-owned real estate. However, the methodology of the StatsCan report has been called into question, and it is unclear whether this report accurately captures the rates of foreign ownership of residential real estate in Canada.
There is a wide public perception that steep price increases and a lack of available housing in Canada’s major cities is largely due to foreign capital. A Century21 survey in 2017 found that Vancouver housing prices were among the highest in the world, and both Toronto and Vancouver have experienced unprecedentedly low housing availability since 2013. Public perception on this issue has blamed the influx of foreign capital, mainly Chinese foreign buyers, for the gap in available housing, particularly in these two cities. In response to public concern, in 2017 the BC provincial government instated a 15% foreign buyer tax on all residential real estate sales made to non-residents.
A recent StatsCan report contradicts this perception: the report finds that while housing prices rose 73.7% in Vancouver from January 2005 to November 2017, and rose 145% in Toronto over the same period, it is unlikely that this dramatic rise in price is due to foreign buyers: the report finds that only 3.4% of Toronto CMA residential properties, and 4.8% of Vancouver CMA residential properties, are owned by non-residents. The largest share of foreign owned residential properties is in condominium apartments: 7.9% of condos in the Vancouver CMA are foreign-owned, while 7.2% of condos in the Toronto CMA are foreign owned. However, the report finds that, on average, the value of condos owned by non-residents is 30.4% greater than condos owned by Canadian residents.
The results of the StatsCan report have since been contested: in a December 27, 2017 Globe and Mail Op-Ed, James Cohen and Peter Dent suggest that the methodology of the report excludes ownership of residential housing that is bought through privately held corporations operating in Canada, but are owned or controlled outside of Canada. Transparency International Canada’s 2016 report found that nearly 50 % of the beneficial owners of the 100 largest Vancouver real estate deals in 2015 are unknown. These unknown beneficiaries used shell companies, nominees, or trusts and are therefore not accounted for in the StatsCan definition of “foreign owner”. Of the G20 countries, Canada is one of only a few which do not require real estate agents or developers to identify the beneficiary of the property, other than merely identify the entity making the sale or purchase.
Regardless of how accurate the StatsCan numbers are, it is likely that the broad findings of the report are accurate, such that the rates of foreign ownership in Canada’s largest cities are in fact much lower than public perception might suggest, and that a dramatic rise in price and equally dramatic decrease in available housing are likely to be relatively independent of foreign ownership rates.