Home sales are surging in the Greater Toronto Area while tumbling in the Vancouver region, raising the prospect that a new tax in B.C. has foreign buyers increasingly looking eastward.
While Ontario doesn't track home buyers who are not Canadian citizens or permanent residents, some industry observers say the psychology of Toronto's housing market is influenced by expectations that foreign purchasers may gradually play a larger role.
The number of sales of detached properties, condos, townhouses and other residential housing types climbed 21.5 per cent in the GTA in September compared with the same month last year. By contrast, sales in Greater Vancouver fell 32.6 per cent.
"If you're foreign buyer who is looking for where to park your money, there is a significant difference in home prices between Vancouver and Toronto," Toronto-Dominion Bank economist Diana Petramala said in an interview Wednesday. "In a Toronto market that is already tight, when you add even a just little bit of foreign investment, that marginal buyer can have big impacts on home prices and sales."
Ottawa moved this week to close tax loopholes used by some foreign buyers while also tightening mortgage rules. But Ms. Petramala expects the Toronto region to remain a sizzling market, as long as low interest rates linger and robust demand continues for housing from both domestic and international buyers. "Toronto is booming with people," she said.
On July 25, the B.C. government announced a 15-per-cent tax on purchases by foreign buyers in the entity known as Metro Vancouver. The tax took effect on Aug. 2.
"Foreign buyers may have turned their backs on Vancouver, but there is no sign they have shunned other regions," Bank of Montreal senior economist Sal Guatieri said in a research note.
The average price of detached properties sold in the GTA in September reached a record $1.01-million, up 23.6 per cent over the past year, according to new data from the Toronto Real Estate Board. It marked the first time that detached houses in the region have surpassed the million-dollar mark for the monthly average price.
By contrast, the average price for detached properties sold in Greater Vancouver hit $1.53-million last month, up 8.8 per cent from September, 2015, but down 16.1 per cent from the peak in January, 2016.
The price gap is even wider on the city level. The price for detached houses sold within Vancouver averaged $2.6-million in August, compared with $1.21-million within Toronto that same month, according to data from real estate boards. The average price for detached properties rose to a record $1.29-million last month in the City of Toronto. The City of Vancouver number for September has yet to be released.
Harry Xu, a Re/Max agent in the Toronto suburb of Richmond Hill, speculates that British Columbia's tax has already affected his business in the past month. Mr. Xu, who also goes by the name of Dr. Sold, said he has received five to 10 calls from prospective clients in Vancouver and investors from abroad. "No people like that have ever called," he said.
For overseas investors who have approached him, the Vancouver market is already overpriced and a foreign-ownership tax makes the prospect too expensive. Similarly, some people living in Vancouver who aren't Canadian citizens or permanent residents want to diversify their property holdings, but also hope to avoid the B.C. tax, Mr. Xu said.
Toronto Mayor John Tory, however, said Wednesday that he hasn't seen any evidence to persuade him overseas money is driving Toronto's real estate market, or that foreign buyers pushed out of Vancouver were now buying in Canada's largest city.
Last week, he asked the Ontario government to start tracking the number of foreign buyers of detached homes in the province, something it does not yet do.
Mr. Tory has said more information about Toronto's "very different" market is needed before any such tax – which would be brought in by Queen's Park and not by the city – could be imposed.
Acknowledging that many Torontonians are having trouble affording a home amid skyrocketing prices, Mr. Tory said that for now he is focusing on affordable housing: "So I think if we increase the supply of affordable housing, especially rental but also some ownership options, that's the best thing I can do with my time and my efforts and our limited resources here."
Ontario Housing Minister Chris Ballard said he first needs to be confident the provincial government knows exactly what the problem is and what the consequences of any policy decision would be. "Whatever we do has to be the right answer. And we can't allow ourselves to be stampeded into creating a solution that ultimately is the wrong solution," he said.
Mr. Ballard said it is not clear if the price hikes in the Toronto area are primarily motivated by foreign buyers, or simply by the region's rapidly expanding population: "So, is it an investor issue, a foreign investor issue, in Toronto? Is it the need to provide housing for people who live here and are looking for a place to buy? Or is it that we have 100,000 people moving to this jurisdiction every year? Is it a combination of all three? It's really not cut and dried."
Ontario Finance Minister Charles Sousa is in regular contact with his B.C. counterpart, Mike de Jong, and also Mr. Tory to share information and figure out what Ontario should do.
"There are market conditions outside of the foreign buyers" that the province has to examine before reaching a decision, Mr. Sousa said.
He added he is worried that putting in place government measures on the Toronto region would drive up prices elsewhere in Ontario.
With a report from Craig Offman