Recent data released by the Canada Mortgage and Housing Corporation (CMHC), reveals foreign condo ownership in Canada has increased by over 49%. Comparing 2014’s numbers to 2015’s, we see an even greater contrast and a higher demand trend for condo ownership by foreign investors.
CMHC’s survey asked condo boards and property management businesses to provide information regarding the total number of units owned by individuals who reside outside of Canada. In 2014, foreign owned condo stock rose 2.4%, and the recent survey shows it increased to 3.3% in 2015. That’s nearly a whole percent, which is a very significant increase based on past trending figures.
Looking at the figures more closely, there may be a reason for this rapid increase. The initial expectations of foreign-owned condos were likely very low compared to the reality. Stock estimates of condo inventory ranging from September 2014 to September 2015 show an increase of foreign condo owners from 6,423 to 9,545. That’s a new growth rate of 49% – again a substantial increase in one year.
However, no one can pinpoint the exact year the 3,122 condos were purchased; the condos could have been bought in previous years as new preconstruction presales or even re-sales or assignments. Looking at the data, it’s clear there was a rise of foreign ownership when for example Vancouver’s condo real estate foreign ownership reached 21,600 units – a record high in 2015.
Looking deeper at the net data gain, you can assume that most of this increase occurred due to a great number of projects finally all coming to completion at the same time.
This can be traced back to the high number of condo presales occurring in 2011. Condo sales were 50% higher than the average over the last ten years. In 2011, price growth grew up to 10%, a double increase from the average standing of 5%. This steers us to believe there was an external influence on the market.
From the high volume of condo sales in 2011, 4-5 years later, we begin to see foreign demand clearly as projects complete. However, it’s still unclear what foreign owners’ intentions are with their condos. There are many different options available for foreign owners – renting out to international students, waiting to sell in the future, or occupying them with families. There haven’t been any negative repercussions on the market as of yet.
One thing we can assume is they are purchasing long-term. With only moderate appreciation rates and a small percentage of condos being listed for sale in newly completed projects, they aren’t interested in short-term investments. After all, foreign owners invested 35% in presale deposits, and they continue to receive a large amount of equity with increasing market prices.
We also know in Toronto, a building’s age is important for foreign owners. They aren’t purchasing condominiums in old buildings. In 2014, data revealed 1.6% of foreign individuals owned condos that were built before 1990. That number increased to 6% for buildings built after 2010 – nearly quadruple the ownership of older developments.
Many believe the number of condos owned by foreigners will continue to rise. Canada’s low dollar has certainly played a key role in the market boom, and the margin will continue to increase for newer condos.