Foreign investment to break records in 2016 - analysts

Offshore investment has long been cited by analysts as a crucial factor driving unprecedented price growth in Canada’s most overheated housing markets, but in a recent study by the Canada Mortgage and Housing Corp. (CMHC), it has become apparent for the first time the degree of influence that foreign money holds over the real estate sector.
The CMHC analysis found that the number of foreign owners increased with each newly constructed high-rise condo building—a result that has been corroborated by other observers.
“I wouldn’t be surprised if 2016 is a record year when it comes to foreign investment in the condo market,” CIBC World Markets deputy chief economist Benjamin Tal told the Financial Post.
“You are seeing more flow of investment into newer buildings,” Tal said. “This study suggests that the flow of money has become significant and it is definitely not slowing down.”
CMHC figures state that as of 2015, 6,790 units of the 91,650 condo spaces built since 2010 have been purchased by overseas investors. This was nearly double the volume compared to the previous year, when foreigners owned 3,482 of the 63,301 units constructed since 2010.
Tal pointed at the potential dangers of the runaway growth in prices and foreign ownership, mostly fuelled by an influx of Chinese investors.
“[The market is] vulnerable to a foreign economy and policies conducted by the Communist Party in China,” the economist said.
CMHC officials noted that the study is just the beginning of a deeper analysis of the complicated relationship between foreign buyers and Canadian housing. Chief economist Bob Dugan said that by Q3 2016, the agency would be looking at new home purchases involving all types of properties in Vancouver, Toronto, and Montreal.

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  • by JSydneyH 2016-05-11 10:19:03 AM

    So, we're using one year when foreign investors bought 11% of the product to dictate our actions.

    I'm not saying there isn't cause for concern but look at the numbers in 2014, foreign investors owned 5.5% of the market. After 2015, they owned 7.4%.

    We don't get alarmed when foreign investors own 11% of Canadian companies, so what exactly is driving this issue?

  • by Scott 2016-05-11 11:13:07 AM

    What's driving the issue and makes it a "hot" topic is the fact that foreign investors are pricing everyone else out of the market. For example suppose you have a house in Vancouver and you sell it to a foreign investor for $2M or more. Now, if you want to move to another house in Vancouver, can you afford it? I assume if you live in Vancouver to begin with, your place of employment and your family is there so taking the money and moving to a cheaper locale may not be an option for some homeowners. The second issue is that some properties according to the Walrus magazine sit empty and the community at large suffers - no students for schools, no customers for local businesses, no sense of community spirit such as when parents go to pta meetings or kids go to boy scouts/girl guides.

    Another issue raised by call a spade a spade was that of astronaut families where some family members receive an allowance from the primary breadwinner employed in a different country but pay no income tax in Canada (if they don't earn income in Canada, Canada can't tax it) and use local resources - education system, health care system, etc.

    Those reasons appear to be why the amount of foreign investment is a hot topic nowadays.

    What the answer idea. I think it's awesome that so many people vote with their money that Canada is a safe and stable country to invest in.

    But, I don't just want foreign investors to pour money into Canada non-stop. I want them to fully participate in Canada. Go to school here, live here, vote here, build a community with Canadians.

  • by 2016-05-11 12:20:24 PM

    heard the other day that foreign investors don't pay the land transfer tax!

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