One in five newly built condos in hot Metro Vancouver markets owned by non-residents

December 20, 2017

In some of Metro Vancouver’s hottest housing markets, at least one in five of the most recently built condo units are owned by people residing outside of Canada.

That number was one of the early findings drawn from the most comprehensive study to date by Canadian government agencies on foreign home ownership in Canada.

On Tuesday morning, Canada Mortgage and Housing Corporation and Statistics Canada released reports comparing non-resident ownership in urban centres across the country, marking the first time the two federal bodies have quantified foreign ownership in the country’s housing markets.

The reports said non-residents of Canada own 4.8 per cent of residential properties in the Vancouver census metropolitan area. Although that number made Vancouver one of only a few metro areas in the country where foreigners owned more than one per cent of residential properties, that region-wide average was low enough for several observers to say it proves foreign ownership is not a significant factor in the red-hot and increasingly unaffordable housing market.

But those region-wide averages didn’t tell the whole story.

A deeper dive into the data showed dramatically different rates of foreign ownership for certain housing types and municipalities, said Andy Yan, director of Simon Fraser University’s City Program.

Only weeks ago, the City of Vancouver adopted a 10-year housing strategy, which seeks, among other things, to address the housing crisis by dramatically increasing the new supply of so-called “missing middle” housing, including row-houses and semi-detached houses.

But Yan’s analysis showed that precise type of housing is owned by non-residents at almost twice the rate of other kinds of homes. While non-residents of Canada own 7.6 per cent of all housing types in the City of Vancouver, the data show they own 12.9 per cent of the most recently built “missing middle” housing.

Of the most recently built condominiums, non-residents of Canada own at least 24 per cent of the units in Richmond, 23 per cent in Coquitlam, and 19 per cent in Vancouver, Yan found.

The creation of more dense housing types like condos and townhouses was intended to help local residents live in denser, more affordable communities, Yan said. But the new data, he said, shows that “If you don’t have some means of throttling demand, you’re really just creating a more efficient investment vehicle for foreign and domestic speculators.”

And now, as policy-makers, including Vancouver city hall, consider supply and demand in the housing market, they will want to analyze Tuesday’s data, said Eric Bond, CMHC’s principal market analyst for Vancouver.

“Absolutely they will be looking at this. I don’t want to speculate on what they might do, but this type of info didn’t exist before, and actually it didn’t exist when some of those policies were being developed,” Bond said. “We really had nothing to go on before.”

Bond also reviewed Yan’s findings drawn from Tuesday’s data, and confirmed their accuracy.

Asked whether 20 per cent of certain newly built housing types going to foreigners is enough to influence prices across the broader market, Bond said “That’s the big question everyone has, and it’s one that we have as well, and one that many policy-makers are interested in, so we are working on it. This information is the first step … That will be the next step.”

Tuesday’s numbers do not include pre-sales, Bond said, and the most recent segment of data represents housing units completed in 2016 and up until June of 2017.

“Cities like Toronto and Vancouver are on the global real estate map,” Bond said. “And these are ultimately questions that the electorate in each country and each city will have to decide how they want to approach it, but we firmly believe the best way to have those conversations is with more information and quality data, and releasing this information on non-resident ownership, I think that’s a great first step.”

For Nathanael Lauster, an associate professor of sociology at the University of B.C., the data confirms a narrative that several housing commentators have held for some time — that foreign ownership is not really driving the rocketing prices.

“There are a lot of people who pretty much say it’s all about foreign buying and I think that this is another data point that really challenges that idea,” Lauster said Tuesday.

That said, even the region-wide average of five per cent of foreign-owned homes is no small number, said Josh Gordon, an assistant professor at SFU’s School of Public Policy. If even a quarter of those properties were encouraged to be put on the market, Gordon said, it would be a dramatic increase in the available inventory.

And all that foreign demand for new, high end condos affects the broader market, Gordon said. “No purchase, in a sense, is quarantined or segregated.”

A non-resident homeowner or foreign owner was defined in the reports as an individual whose primary residence is outside of Canada, regardless of the individual’s nationality. That does not match the definition of foreign buyers for the purpose of B.C.’s tax, as Lauster noted, and it would not capture foreign buyers who purchase homes through resident family members, as just one example.

As Gordon put the foreign ownership findings in the report: “This is pretty much as low as it could be.”

When it comes to single detached homes throughout the Vancouver region — 3.2 per cent of which are owned by non-residents — the average assessed value of property owned by non-resident owners is $2.25 million, while the average assessed value for residents was $1.6 million. Foreign owners also held far bigger detached homes than did residents, with their homes sized an average of 4,800 square feet — about 32.2% larger than their resident counterparts.

According to the report, foreign buyers owned less than one per cent of the condo stock in 17 metropolitan areas across the country. The only metropolitan areas with foreign buyer shares bigger than one per cent were Toronto, Vancouver, Montreal, Halifax, Victoria and Gatineau.

Foreign buyers can be found throughout the region, but in greatest concentration, proportionately, in Vancouver and particularly in areas like the Burrard peninsula, where many of the city’s largest and most swanky developments have been built over the last few decades.

At the same time as non-resident ownership stagnated in Vancouver and Toronto, it rose markedly in Montreal. The CMHC report stated that foreign buyers taxes in B.C. and Ontario may have been factors.