Ottawa just replaced Toronto as a foreign-homebuyer magnet: RBC

Many businesses and municipal services will be closed – or have different hours of operation – on Labour Day Monday in Ottawa. Getty Images

Ottawa has replaced Toronto as the housing market with the highest presence of foreign homebuyers after Vancouver and Victoria, according to new RBC research.

“Foreign homebuyers now place a larger role in Ottawa than the [Greater Toronto Area],” reads the report, which analyzed residential transactions between Nov. 18, 2017, and Feb. 16, 2018.

Between those two dates, only 2.1 per cent of transactions involved foreign buyers in the GTA, compared with 2.5 per cent in Ottawa, the paper shows.

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The change is largely due to Ontario’s Fair Housing Plan, RBC economist Robert Hogue wrote. In April 2017, the province introduced a slew of housing measures aimed at improving affordability and taming what was then a red-hot housing market in Toronto and the so-called Greater Golden Horseshoe (GGH) area of southern Ontario. Among the new policies was a 15 per cent tax on non-resident real estate speculators, which did not apply to Ottawa or any other Ontario market outside the GGH region.

READ MORE: Canada’s average home price drops over 10% year-over-year in March

The tax seems to have chased significant numbers of non-resident real estate investors from Toronto, with the share of foreign-buyer transactions dropping by more than half to 2.1 per cent from 5.9 per cent between April 2017 and February 2018.

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Those foreign buyers, though, did not exactly swarm to Ottawa, Hogue noted. The nation’s capital only saw a small uptick in foreign real estate transactions between April of last year and February, up from 2.1 per cent to 2.5 per cent.

READ MORE: Are home prices climbing out of reach in Ottawa and Montreal, too?

“If there was any movement from the GGH to Ottawa, it was minimal,” Hogue wrote.

That’s very different from the effect that a similar tax on foreign homebuyers had in B.C.

When the government of then-premier Christy Clark introduced a 15 per cent levy on non-resident buyers in Metro Vancouver in July 2016, foreign-buyer transactions plummeted. The share of non-resident transactions dropped from around 15 per cent before the tax to around one per cent immediately after. The share of foreign homebuyers has since rebounded somewhat, but has so far remained below six per cent, according to a chart in the report.

But unlike in Toronto, where the tax seems to have simply chased away many foreign buyers, in B.C. a significant number of non-resident investors appears to have flocked from Vancouver to nearby Victoria, which saw its share of foreign homebuyer transaction rise by over 30 per cent on average in the six months following the introduction of the tax. (The B.C. government of John Horgan has since extended the foreign buyer tax to Victoria and other markets.)

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READ MORE: B.C. budget: new housing taxes might not knock down prices, but they could help tame them

Still, even in B.C. the introduction of the tax has kept a lid on the presence of non-resident buyers.

“Foreign buyers now play much lesser roles in both [Toronto and Vancouver],” Hogue noted.

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