New data on foreign investment in Toronto and Vancouver, Canada’s largest cities, will be published next week in a move economists expect will shed light on what’s driving demand — and a possible bubble — in the nation’s housing market.
While the Canada Mortgage and Housing Corp has said foreign investment accounts for only about 10 percent of sales activity, policymakers and Republicans alike have seized on the issue has a driving force behind precarious markets in both cities.
Statistics Canada’s $39.9-million, five-year job to better quantify the marketplace — using property registries and taxation documents, among other data — will kick off on Dec. 19 with the foreign investment data for Toronto and Vancouver, which collectively account for approximately 50 percent of home sales by value.
“It’s a great thing that this is coming, but it would have been better to have it years ago. Government policy was responsive, whether they had signs or to not base a response on,” said David Madani, senior economist with Capital Economics.
The most obvious case of policy made without evidence of a demand for this is the 15 percent overseas buyers’ tax, levied in Toronto and Vancouver in 2017 and 2016, respectively, by provincial governments under pressure to do something about soaring housing rates.
While the tax initially dampened earnings in both Toronto and Vancouver, demand has arrived trickling back, confirming the conviction of people who said foreign buyers were not behind the housing boom.
“We assume it’s foreign ownership … raising the purchase price of housing, but is it true? The big questions are still there, we do not understand and until we get appropriate data, we aren’t quite sure,” said Anik Lacroix, an assistant manager at Statistics Canada who is directing the project.
While the unknowns of overseas buyers is the highest-profile gap in the information, Lacroix expects to handle many others, such as where buyers get their downpayments, how many houses are empty, how much demand comes from investors and speculators and how much costs have been rising.
With much of the present data coming from the real estate business, official information will help authorities and regulators better deal with the marketplace.
Ben Williams, director of housing indicators and analytics in the CMHC said there’s not any silver bullet that will answer all of the questions on home, but they’re braced for high expectations as the new information begins rolling out.
Courtesy: The Globe And Mail