Shortly after the Ontario government introduced legislation designed to curb foreign real estate buyers and real estate speculation, the Toronto Real Estate Board undertook a data analysis exercise to understand just how many foreign buyers there are in Toronto and the GTA, and just how much real estate speculation is really going on in this area. The data contradict the government’s and some economist’s assertions that foreign buyers and speculation are driving up the cost of Toronto and surrounding area real estate.
To arrive at the data, the TREB analyzed aggregated data from the Municipal Property Assessment Corporation (MPAC) and Teranet on property sales and residential data in the Greater Golden Horseshoe. The data range analyzed was for the date range of 2008 to April 2017.
Some of the TREB’s key findings:
-Foreign buyers accounted for an average of 2.3 percent of real estate buyers in this period, with the share being 2.6 percent for Jan-April 2017
-Of these foreign buyers, most purchased their home as a place to live
-Homes bought and sold within one year of the original transaction by any foreign or domestic buyer accounted for 5 percent of transactions in 2016, 7 percent of transactions in Jan-April 2017
-Buyers that owned more than one property in Toronto & the GTA as of April 2017 accounted for 6.2 percent of all properties
John DiMichele, TREB’s Chief Executive Officer, had this to say about the findings. “It is not yet clear what impact the measures contained within the Ontario Government’s Fair Housing Plan have had on TREB’s market area or the broader Greater Golden Horseshoe. Despite the recent uptick in new listings on TREB’s MLS® System, we believe that we all have to be committed to a better understanding of issues affecting demand and supply dynamics in our marketplace. TREB will continue to collect and disseminate data on our marketplace and will continue to work with all levels of government as it relates to housing market policy.”
Ontario government disputes TREB data
The Ontario government, keen to justify its new 15 percent tax on foreign buyers, questioned the validity of the data in a statement released to CBC Toronto. “The residency of many individuals captured in the data set is unknown and, as a result, this is not a reliable way to determine the number of non-residents participating in the housing market. There is also no strong correlation between the number of non-resident purchasers and the number of out-of-country mailing addresses attributed to buyers.” The Ontario government statement also disputed the TREB data on real estate speculation, stating that it didn’t reflect the other data it had reviewed, but not revealing the source of that data.
Who to trust – the government or the TREB?
The Ontario government has a valid point in that examining mailing addresses may not be the way to determine if someone is a foreign buyer or not. The reality is that we won’t know exactly how many foreign buyers there are until its new legislation – which requires full residency disclosure – has been in force for some months. However, the Ontario government’s failure to release the source of the other data set it had been checking to substantiate the claim that real estate speculation is a problem in Toronto and the GTA makes it difficult to verify its side of the argument.
The TREB did use the best data available to come up with its figures on foreign buyers and real estate speculation – there are no “hidden figures” anywhere else. Its attempt to do so in a transparent manner means that right now, there may be some truth to the fact that demand, and not foreign buyers and real estate speculation, is driving up real estate prices in Toronto and the GTA.