Foreigners Investing in Canadian Real Estate

There’s a gold rush in Canada…

Foreign buyers have been mining for years now, competing with domestic buyers for real estate, especially in Greater Toronto Area and Greater Vancouver.

Why?

Because the Canadian economy continues to grow at a rapid rate… and…

Canada is leading the way of all G7 nations in population growth. It’s expected to rise at a rate of 2.4% over the next few years (while most others are seeing a population decline). GTA is expected to receive 28% of this growth (according to CBRE’s annual Global Living 2019 report). With a rapidly growing population, there comes an influx of foreign buyers ready to sweep up gold-coated real estate.

Plus… you don’t need to have permanent residency or citizenship to buy property in Canada.

As a buyer, you can reside in Canada temporarily. If you choose to have an extended stay or become a permanent resident of the country, you will, however, need to fulfill immigration laws.

Or, you can choose to remain a non-resident. You simply need to comply with the CRA (Canada Revenue Agency) by filing annual tax returns.

This makes it easy for foreign investors to get themselves a slice of the pie.

Where Are Foreign Investors Buying?

#1 Toronto

According to the PWC – Emerging Trends Annual Report, net immigration in the Greater Toronto Area hit a 15-year high in 2018.

With an ever increasing population, always comes an increased demand in housing. But this demand isn’t just coming from those living in Canada. Increases in population and economy will attract millions of gold-frenzied eyeballs worldwide.

The CBoC reports that the local construction sector is estimated to hit 10 years in a row of growth this year (2019), with GDP estimated to reach approximately 2.3%.

In April 2017, once the 15% foreign buyers tax was enforced, market conditions fluctuated. Plus, interest rates rose (with Bank of Canada raising theirs 0.5% to 1.75% from 2017 to 2018. Not only that, but according to CBRE’s Global Living 2019, the average house pricing grew only 1.5% in 2018.

This is very low, compared to the average 10% annual growth (which we’ve seen for the past 10 years).

#2 Vancouver

Vancouver has been the West Coast pillar of Canada for decades. It’s one of the most expensive cities to live in across the globe. With an average house price of $1,011,200 (March 2019), Canadians are feeling the after-effects of major foreign investment over the years.

According to Stats Canada, foreign property ownership in Metro Vancouver is above $45 billion (including $22 billion in the City of Vancouver).

Also, 20% of condos worth $1.5 million or more are ownded by non-residents. This number is staggering, and it is rare to see a city in the world with foreign ownership this high on condos.

After there was still a struggle to cool the market in 2017 with the 15% foreign buyers tax, there had to be more done in Vancouver.

So the foreign buyers tax was increased to 20%. Another solution brought in was an increased tax rate on homes valued above $3 million. (Read more at PWC – Emerging Trends). Plus, an empty home tax of 1% of the property’s assessed taxable value.  

From August 2017 to August 2018, annual growth for house prices was 4.1%, which was much lower than the 9.3% average over ten years (according to Global Living 2019).

An Opportunity To Strike Back From The Foreign Buyer Frenzy…

Despite the difficulty in affordability to enter into the market (especially as a first time home buyer), this cooldown period in the two hottest real estate markets in Canada is good news for Canadians.

It brings an opportunity to enter the market during a cooldown from the fluctuations that have been greatly influenced from foreign buying.

Experts at SKYHUB suggest that if you’re looking to get in the market but have been dealing with affordability constraints, a window of opportunity has opened up for you to get in before it heats up again.

When it comes to choosing between Vancouver or Toronto: Analysts advise toronto homes takes the lead over Vancouver with the very promising economic and population growth fueling the future real estate growth.

David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.