Toronto is the new destination for foreign real estate buyers who have been scared off by the additional 15 percent taxation that that they will incur if they choose to buy property in Vancouver, a report said.
However, according to the report, the impact of foreign buyers on Toronto real estate scene is not anywhere as large as the impact Vancouver saw. Vancouver even saw a period when 20 percent of property buyers were foreign buyers; this trend however saw a decline in August after the new tax came into effect on August 2.
“With record immigration in 2016 and the strong growth in prime first-time homebuyer population, the fundamental factors supporting housing activity appear stronger in Toronto than Vancouver– helping drive existing home sales and prices up,” the report from Toronto-Dominion Bank said.
The sales-to-population ratio in Toronto has risen sharply recently, suggesting that foreign investment and speculation are playing a part, albeit likely smaller than in Vancouver, the report also noted.
The million dollar question now is whether foreign investment has shifted east and Toronto has become the new Vancouver,” the report said, raising the question of whether Toronto would now become the destination foreign investors would prefer.
Earlier, the Canadian Real Estate Association said its September results show the strength of the Toronto market continues to impact national sales figures. The association, which represents about 100 boards across the country, said existing home sales rose 0.8 per cent in September from August but still remains 5.6 per cent below the high in April this year.
“The finance minister’s recent changes to regulations affecting mortgage lending has added to housing market uncertainty among buyers and sellers,” Cliff Iverson, president of CREA said.
First time homebuyers will likely have to rethink the home they can afford with the new mortgage regulations they will be faced with in addition to the turbulent housing market. the new rules insist that all mortgage insurance backed by Ottawa include a provision that the borrower be forced to qualify for a loan based on the much higher rate than the available lower rates of the major banks for a five-year fixed rate mortgage. This could lead to the customers using the higher rate to get a smaller loan or just not qualifying for a loan at all.
These new regulations could also mean that the real estate market could see a decline in the coming year along with a reduction in prices, experts feel. A 10 percent decline in sales is possible next year with a one percent fall in prices, Diana Petramala, economist with Toronto-Dominion Bank said.
“This is the sixth time in eight years that the government has tightened mortgage regulation, and in each event, sales have fallen between 6 per cent and 14 per cent in the following three to six months,” she added.
Other economists too feel the housing market is likely to see some softening of sales as the new taxation and policy measures are being implemented.
