Foreign buyers aren’t driving Toronto real estate

According to TREB Toronto homes will see another year of double digit gains, but the new mortgage rules are causing homebuyers to shift their expectations

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When Vancouver slammed the door on foreign buyers last year there was a great deal of concern that they would simply shift their attention east to another overheated market: Toronto. But a new study suggests Ottawa’s new tougher mortgage rules will have a bigger impact on the Toronto market.

New research by Ipsos Public Affairs found that while some foreign buyers did migrate across the country, fears that it was helping fuel the sizeable price gains in the city are largely unfounded.

No surge of foreign buyers

Presenting their findings today at the Toronto Real Estate Board Market Year in Review and Outlook 2017, the research firm says based on its survey of 3,500 realtors operating in the GTA there has been no surge in foreign interest in Toronto. Only 10% of realtors in Toronto received calls from foreign buyers who were previously looking at Vancouver, since that city imposed its strict rules to curb foreign investment. Those changes included a 15% tax on foreign buyers as well as new rules around vacant properties. Of those calls from foreign buyers that came into Toronto realtors, most never went past the information stage.

The Ipsos survey suggests foreign buyers accounted for just 1,061 sales, or just 5% of all sales across the GTA in 2016. Overall Ipsos estimates less than 2% of realtors in the GTA represented a foreign buyer that had been scared away by B.C.’s new tax. Of those foreign buyers, 40% say they are making the purchase with the intention to live in the home and 25% say they are buying the property to rent out. Only 10% say their purchase is an investment property that they plan to leave vacant.

New mortgage rules are changing home buyer behaviour

While Ipsos’s findings don’t point to foreign buyers as a disruptive force in Toronto, it can’t say the same about Ottawa’s stricter new mortgage rules. According to their survey of more than 1,000 prospective homeowners, 69% of homeowners are shifting their home buying expectations as a result of the new mortgage rules laid out by Ottawa last October.

A third of these prospective home buyers say the new rules forced them to lower how much they intend to spend on a home. Another 25% say they it caused them to reconsider the type of home they intend to purchase.

First-time homebuyers are driving real estate in Toronto

One of the many reasons why new mortgage rules and not foreign buyer influence will affect Toronto’s real estate market has to do with the make-up of prospective buyers in this market. More than 64% of those intending to buy a home in 2017 in the city of Toronto are first-time homebuyers, up from 56% last year. First-time homebuyers are less of a factor outside of the downtown area, which is why, across the entire Greater Toronto Area, that figure dips to 53%.

These homebuyers are under no delusion about how difficult that will be. According to TREB first time homebuyers now expect to pay $693,178 for their first property, $80,000 more than what they expected to pay last year when asked that same question. But even though they are stretching their budget there are still no assurances they’ll be able to get into the tight GTA market. In the wake of a small number of homes for sale and small dwindling number of new properties under construction, TREB is forecasting another year of double digit price growth in the city. According to TREB, the average income for a family buying a home in Toronto is $98,000.

At the same time, more and more existing home owners are opting to stay put amid growing concerns that they won’t be able to find a larger home in their area if they decide to sell. This further constrains the supply side of the GTA’s real estate market and leads to a sharp increase in the amount homeowners are planning to spend on renovations this year. TREB estimates homeowners will spend close to $50,000 on renovations, up from $35,000 just one year ago.

10 comments on “Foreign buyers aren’t driving Toronto real estate

  1. Surveying real estate agents about foreign buyers is like asking restaurant workers about tips; you’re guaranteed to get a bias answer.
    Additionally, didn’t they say the same thing in Vancouver? That foreign buyers weren’t an issue? Similar realtor surveys showed only 5%. Then they did a proper study and realized it accounted for a lot more. Then they implemented the foreign buyers tax and market took a nose dive, and at the same time, the Toronto market turned on the after burners…probably all just coincidence though…
    Finally, if foreign buyers are not an issue, a tax shouldn’t matter. If there are hardly any foreign buyers, then hardly anyone will be on the hook for this tax, and it should have a neglible impact on the market…right?

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    • Bravo Chris great coment!!!!

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    • You are spot on – there is absolutely no doubt foreign buyers are driving this market. And those first time home buyers are mostly landed immigrants with deep pockets. Definitely not Canadian born millennials because there is no way they can afford this market. What a joke.

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      • Not necessarily true. Millennials with smart parents that saved up are also buying. Mom and Dad help with the downpayment, and they carry the mortgage.

        Really its the downpayment requirements that make a lot of the purchase difficult.

        That next generation though…they’re gonna live in vans by the river.

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    • i agree. i am a realtor myself but have access to limited sales data… i can see a lot of speculative investors driving the prices… most homes selling in high demand area are being sold within a few months at a much higher price…. if TREB were to release that data, people would clearly be able to see the trend… but its likely not going to happen. :)

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    • I couldn’t agree anymore especially in regards to your last point.

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  2. I really though Ipsos had more credibility than “we asked realtors very nicely to give up information they may have a vested interest in protecting” SHAM

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    • Stop with the propaganda and say the truth!Its 94 % foreign and domestic speculators!!!!Goverment should do something immediately!!!!

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  3. First time home buyers have always been there. Why in last two years prices are increasing in leaps and bounds and more so after Vancouver’s implementation of foreign buyer’s tax. Of course, foreign buyers are not the only reason, foreign an local buyers’ speculation and people holding more than one house especially realtors in hope for speculation are some of the other reasons. So not only we need foreign buyers tax we also need taxes on empty homes and high tax on earnings from buying and selling of houses other than primary one. We can not sell the country to TREB.

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  4. SPECULATIVE INVESTORS, ALSO KNOW AS ULTRA CLEVER AND ULTRA DEVIOUS REAL ESTATE AGENTS, WHO DOUBLE AS HOME BUILDERS ( WHAT A JOKE) SKIRT THE RULES, DO NOT PROVIDE TARION WARRANTY, DO NOT PAY CAPITAL GAINS TAXES, EMPLOYEE FOREIGN ILLEGALS, AND ARE BUILDING SUBSTANDARD HOMES AND SELLING THEM MOSTLY TO FOREIGN BUYERS, MOSTLY CHINESE. IF YOU EVALUATE CAREFULLY LOOKING AT LAND REGISTRY IN SPECIFIC POCKETS OF QUALITY NEIGHBORHOODS, SCHOOL DSTRICTS, AND PROXIMITY TO EITHER SCHOOLS OR RELATED COMMUNITY YOU WILL SEE THAT THE SALES ARE 75-80% TO FOREIGHN BUYERS. REAL ESTATE AGENTS WILL TRY TO TELL YOU OTHERWISE SO THEIR GRAVY TRAIN DOES NOT STOP. THE MUNICIPALITIES ARE RAISING ASSESSMENTS AT EVERY OPPORTUNITY AND DENYING A PROBELM TO KEEP THEIR GRAVY TRAIN GOING. HOW MUCH OF YOUR DISPASABLE INCOME HAS GONE TO SERVICING THE ILLEGAL PROPERTY TAX GRAB THAT IS GOING ON?
    THE PROVINCE IS EVEN SCARED TO STOP THIS AS THEY GET BIG REVENUES FROM ASSESSMENTS AND LAND TRANSFER TAXES.
    INSTEAD THEY SHOULD BE FOCUSED ON SLOWING DOWN THE MARKET CATCHING THE TAX CHEATS AND SENDING THE LIILEGAL WORKESRS HOMETHE SITUATION IS OUT OF CONTROL AND THE PROVINCE AND OR CITY WILL ONLY INTRODUCE A SMOKESCREEN TAX GRAB TO HELP THEM WITH THEIR FISCAL MIS MANAGEMENT. I DO NOT UNDERSTAND WHY PEOPLE ARE NOT IN REVOLT.

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