TORONTO – A nameless, faceless figure at the heart of the controversy surrounding soaring real estate prices has been named The Canadian Press business newsmaker of the year.
As home prices in Vancouver and Toronto rose at a torrid pace, public and political attention shifted to an enigma that, rightly or wrongly, some believed to be the culprit: the foreign investor.
Stories about buyers from outside Canada, particularly those from China, snapping up Vancouver houses dominated headlines over the past year, sparking outrage among some.
The issue became so heated that it prompted the B.C. government to implement a 15 per cent tax beginning in August on homes purchased by foreign nationals in Metro Vancouver.
The federal government also intervened. In October, it closed a tax loophole that had allowed non-residents to avoid paying capital gains tax on the sale of a principal residence.
Brad Henderson, president and CEO of Sotheby’s International Realty Canada, says concerns about foreign investment in the Canadian real estate market stemmed from eroding affordability.
“People were watching with amazement as each month went by and prices seemed to climb higher and higher,” Henderson said, adding that many would-be first time homebuyers were angry about being squeezed out of the market.
“People needed to have a villain to blame. In our opinion, the villain that ended up getting blamed was the foreign buyer, because that person, for the most part, didn’t have a face. It was a notion in most people’s minds.”
The foreign investor captured 37 per cent of the 27 votes cast in the annual poll of the country’s newsrooms by The Canadian Press. It’s the first time since the survey began in 2003 that the business newsmaker of the year wasn’t a specific person.
Alberta Premier Rachel Notley was next, with 22 per cent of the vote, for her efforts to reshape the province’s energy-dependent economy.
Several editors and broadcasters said they voted for the foreign investor because of his or her implications on national real estate policy.
“It dictated what happened in other areas of the country,” said Dave Bradley, breaking news producer at Newstalk 1010 in Toronto.
The foreign investor also captured attention beyond the hot housing markets of Toronto and Vancouver.
“A business story that resonates with all homeowners across the country,” said Carl Fleming, managing editor of the Cape Breton Post.
Not all were on board with the choice, however.
Douglas Cudmore, the Toronto Star’s senior editor of business, innovation and justice, opted instead for Unifor president Jerry Dias for wrestling more than $1.5 billion in investments in Canada from North America’s three largest automakers.
“I would vote for the foreign investor, except she seems to be mythical,” Cudmore wrote. “But a lot of people had the auto talks circled in bright red ink this year. Would a union actually be able to win concessions from the automakers? And would the outflow of jobs from Ontario be abated? We were surprised by the success Dias and his team had.”
It’s unclear just how much of an impact foreign investors have had on Canadian house prices, as research on the topic is scant. But data released by the B.C. government suggests its tax on foreign nationals could be deterring investment from abroad.
In the most recent information available, the province says about three per cent of homes sold in Metro Vancouver in October went to foreign nationals, far below the 13.2 per cent rate registered in July, the month before the tax kicked in.
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In its latest survey of property managers released last month, Canada’s federal housing agency pegs foreign ownership of condominiums at 2.2 per cent in Vancouver and 2.3 per cent in Toronto.
That’s down from 3.5 per cent in Vancouver and 3.3 per cent in Toronto in 2015, according to the report by Canada Mortgage and Housing Corp. However, that figure doesn’t include any other housing types, and CMHC president Evan Siddall has previously said that the share of foreign ownership is likely higher for single-family homes.
In its latest budget in March, Ottawa earmarked $500,000 for Statistics Canada to figure out the best way of gathering data on the purchase of properties by non-residents.
Experts say it’s possible that the rate of foreign ownership is higher than the available figures suggest. However, they’re also cautioning against turning non-residents into scapegoats, arguing that they are not the driving factor behind rapid price growth.
“It’s really hard to argue that it’s the major reason that prices are increasing,” says Andrew Scott, a senior market analyst for the Greater Toronto Area at CMHC.
“There’s lots of other things that are going on at the same time. It’s definitely a factor though. I’m not saying it’s insignificant … but it’s definitely not the major force that some people think it is.”
Scott says supply has simply been unable to keep up with demand, which has been fuelled by low interest rates and healthy job growth in Ontario and B.C.
From that perspective, B.C.’s foreign investor tax may have not been the most optimal solution, Henderson said.
“It was probably more political than it was practical or good policy,” he said. “Time will tell.”