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Foreign Investment in Canada’s Luxury Real Estate Market

It is clearly not a new concept to the residents of Canada that the Canadian luxury real estate market has been driven upwards the past few years by foreign investment, but by how much exactly? We often hear of jaw-dropping articles in the media like “Chinese Buyers In Vancouver Real Estate Account For One-Third Of Sales Volume” (Huffington Post), or “International Buyers Undergird Toronto’s Condo Market,” (Morrison Financial) but how much of Canada’s real estate market is really affected by foreign buyers? A survey primarily focused on international activity was recently presented by Royal LePage, and brings to light some of the important facts about foreign money in the Canadian luxury real estate market.

The findings in the Royal LePage Carriage Trade Luxury Properties 2016 Report was conducted from an analysis of luxury homes in four major city centres in Canada, where luxury is defined as “any property that cost[s] no less than four times the average home price” (MoneySense). The analysis was conducted in the four areas of Greater Toronto, Greater Vancouver, Greater Montreal Area and Calgary. The real estate professionals that were surveyed in this study suggests that there has been a significant increase in overseas activity over the last decade. Additionally, some agents that were polled expressed that “more than 25% of luxury properties [are] now purchased by foreign buyers” (MoneySense).

According to this study, between 2005 and 2015, Greater Vancouver is leading in the most foreign investment, with a 125% increase in the past decade. Greater Toronto comes after Vancouver with a 69% increase, following with Calgary with a 61% increase and lastly the Greater Montreal Area with a 58% increase. However, Phil Soper, the president and chief executive officer of Royal LePage, proposes that “the impact of foreign buying on Canada’s overall residential real estate market is small,” (Royal Lepage) in spite of foreign investment soaring in the luxury residential real estate market. He also believes that the leading causes of this surge in overseas investments are due to the current “stable political and financial systems, along with a tradition of cultural tolerance and openness to immigration and diversity”, as well as the fall of the Canadian Loonie.

In conclusion, more than 50% of the real estate professionals that were polled believe that Chinese foreign nationals are the primary overseas buyers in the nation, and 60% of the agents predict further activity in this coming year. One-fourth of the realtors suggested that international buyers purchased as much as a quarter of the residential properties in the Canadian luxury real estate market. Yet, with this up rise of international investment, it is important to keep in mind that a majority of the homes sold in Canada are still bought mainly by Canadians, in between the ages of 45 and 54. 84% of the agents surveyed stated that buyers described as ‘couples’ purchase 97% of the luxury residential homes, and 66% of those buyers have children residing at home.

A brief analysis for each of the cities is presented here:

Greater Toronto Area
In Toronto, the demand of luxury properties surpasses the supply, creating a shortage of luxury homes. According to 76% of the realtors surveyed, this has lead to an increase of activity since 2005. 69% of realtors indicated that there has also been an increase of international purchasing activity in those ten years. 88% of agents indicated a increase since January of this year. According to Cailey Heaps Estrin, a Royal LePage Real Estate Services Ltd. sales representative, “Ten years ago, a $2 million house in the Toronto market sounded expensive but now, that price is much more common” (Royal LePage).

Greater Vancouver
When it comes to foreign investment in luxury properties, Vancouver leads in the most foreign buyers. 79% of the realtors who were surveyed suspected that foreign investment had increased since January 2016, especially from Mainland Chinese purchasers.

According to this survey, almost one-third of the residential luxury homes are sold to overseas buyers. According to Jason Soprovich, a real estate agent with Royal LePage Sussex, “A luxury residence would typically be a home in [the] $4-million to 4.5-million range throughout the Greater Vancouver area” (Bilbaoya). “We believe international interest is a significant factor driving price increases in the area, as foreign buyers view Vancouver as a ‘dream-city,’ as it is so beautiful. When visiting the region, they instantly fall in love,” (Royal LePage) states Soprovich.

Greater Montreal Area
In comparison to the findings from agents that were polled in other parts of Canada, the residential luxury real estate market in Montreal, and even in the rest of Quebec, has stayed “relatively healthy” (Royal LePage). Only 39% of the real estate advisors that were surveyed had suggested a increase since January of 2015, while only 58% of agents thought that “less than 10 per cent of luxury real estate purchases in the province are made by foreign buyers” (Royal LePage).

On the contrary, the luxury residential real estate market in Calgary has fallen since January of 2015. Not only has the market value declined, but two-thirds of the realtors who were surveyed suspect that this fall in price will continue through the rest of this year.

Huffington Post
Morrison Financial
Royal LePage

Tom Gradecak via LuxuryHomes.com
Marco Chiapetta via LuxuryHomes.com