Foreign buyers are driving price gains in Canada's expensive home markets, a trend that picked up speed at the beginning of 2015 and is expected to continue to increase in the future, according to a Royal LePage survey released today.
The survey of 250 Royal LePage real estate advisors showed that 24% of those surveyed believed that 25% or more of luxury properties in their area were bought by foreign buyers. Royal LePage defines foreign buyers as buyers who live outside of Canada all or most of the time. In Vancouver, 83% of agents surveyed said they had seen an increase of foreign buyers in 2015. Half of all the agents surveyed said China was main source of international interest in Canadian real estate.
Prices in Point Grey and West Vancouver, two high-end markets in Vancouver, have gone up 135% over ten years; the next highest increase was Toronto's Lawrence West neighbourhood, up 76% over ten years.
“The luxury market has been driven purely on the demand from investors and the appeal is the perfect storm of geographical appeal,” Jason Soprovich, a real estate agent with Royal LePage Sussex who specializes in the West Vancouver market. “Low interest rates, very low active listing rates and pent up demand.”
Soprovich attributed the Vancouver percentage increase to demand from foreign buyers. He estimated that out of 100 homes in West Vancouver, buyers from Mainland China would represent between 65 and 70% of sales, while in the Vancouver westside neighbourhoods of Point Grey and Shaughnessy, those buyers represent well over 50% of home sales.
“[In West Vancouver] we've seen properties double in value over the past eight, nine months,” he said. “In the British Properties, some properties we saw listed 8 months ago at $2.4 million are now selling at $4.5 million.”
In 2014, Canada effectively ended its investor immigrant program, but Soprovich said that change had not dampened demand from wealthy Mainland Chinese buyers. Many of those buyers have a 10-year, multiple-entry visitor visa to Canada, he said, and are attracted to Vancouver real estate for the investment potential, as a place to send their children to school, and an eventual retirement destination.
Earlier this week, B.C. Finance Minister Mike de Jong said he was “biased” in his belief that supply constraints, not foreign buyers, are the main factor behind Metro Vancouver's extreme home price increases of the past 16 months; between April 2015 and April 2016 benchmark residential home prices across Greater Vancouver rose 30%. De Jong said his government is reluctant to impose any extra tax targeting expensive properties or home owners who don't make their income in Canada without more information on how that would affect the real estate market.
He also warned that an extra tax targeting real estate could deter overall foreign investment in British Columbia.
“It's naive to think there hasn't been a lot of investors moving into this part of the country – there is and it has had a major affect,” Soprovich said, adding he thinks Vancouver should embrace real estate activity and the region's attractions to wealthy people from all over the world as a main economic driver.
Soprovich said levying some sort of extra property tax could deter some real estate activity, but he believes it's important in the fact of intense interest from from foreign buyers.
Vancouver-based academics have proposed several ways taxes could be designed to target either expensive properties or property owners who do not make income in Canada.
“If this large number of people are influxing into the city are coming to city and using infrastructure, there needs to be some level of taxation,” Soprovich said.