A wave of moneyed but far less picky foreign would-be buyers might lead to another period of sharp price growth in Toronto’s already overheated housing market, the Bank of Montreal warned.
Citing a recent survey that revealed that overseas nationals comprised around 4.9 per cent of home sale transactions in Toronto in the 12-month period ending November 2016, BMO senior economist Sal Guatieri stated that the lack of more precise information about foreign buyers should be a major concern.
“If foreign investors are wealthier and less discriminating buyers compared with domestic residents, then their purchases could put undue upward pressure on prices that’s disproportionate to their share of sales,” Guatieri wrote in a recent outlook for the Canadian economy, as quoted by The Globe and Mail.
“Not surprisingly, Toronto’s rapid price gains have spilled into surrounding regions and condos where affordability is still decent (though this won’t last if double-digit price gains continue),” the economist noted.
“In addition, escalating condo prices in Toronto (19 per cent year over year to January) risk fanning overconfidence among developers and investors, resulting in overbuilding and increased speculation.”
The statements came as the Toronto Real Estate Board levelled criticisms at the federal and provincial governments for policy moves aimed at stifling demand, rather than addressing the fundamental problem of supply in red-hot markets.
Earlier this month, TREB head John DiMichele argued that a foreign buyers’ tax similar to that implemented by the B.C. government in mid-2016 would lead to “less rental supply, because the number of investors looking to purchase and rent out a property could decline.”
Such conditions might also provoke “stronger price growth in neighbouring communities/regions without a tax,” DiMichele said.
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