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How International Buyers Are Reshaping Canadian Real Estate

How International Buyers Are Reshaping Canadian Real Estate

With international buyers reportedly moving away from Vancouver, people in Toronto are talking more about foreign condo ownership and investment. September 2016 saw a big jump in GTA real estate with 9,902 sales, according to TREB, and there is speculation that international buyer interest might have something to do with it. But hard data has yet to be released to prove this.

International buyer data in Toronto and Vancouver

In 2015, CMHC released data that found 3.3% of GTA condos had international owners, a statistic that was up from 2.4% in 2014. They reported that 10% of units built after 2010 in Downtown Toronto were internationally owned. Reports for Ontario 2016 have yet to be finalized, but some data involving international buyers has been collected from B.C.

According to research released by the B.C. government, 11% of real estate transactions in the city of Vancouver area involved international buyers from June 10 to July 14, 2016. In Richmond and Burnaby, Vancouver suburbs where many immigrants are buying homes and settling, 18% of transactions involved international buyers. Between June 10 and August 1, 2016, there were 1,974 real estate transactions in Vancouver involving international buyers. But after August 2, when the

Between June 10 and August 1, 2016, there were 1,974 real estate transactions in Vancouver involving international buyers. But after August 2, when the foreign buyer tax was introduced, that number dropped to a mere 60.

Obviously, international buyers are starting to look elsewhere for Canadian homes that don’t come burdened with a financially crippling tax.

What's next for international buyers in Toronto?

The rise of home sales in the GTA over the last two months has led some to believe that international buyers have zeroed in on Toronto. So much so that the federal government has enacted new measures to curb the reported abuse of “principal-residence” tax exemptions for homeowners recouping tax-free capital gains when they sell a home in Canada.

A Globe and Mail investigation uncovered widespread reports of this abuse in Vancouver. In many instances, a foreign speculator would buy a home in Canada, get a family member who lives in Canada to claim it as their primary residence, then sell the property and reap the tax-free rewards. The new federal measures will hopefully hinder real-estate speculation, but we’ll have to wait and see how the CRA plans to actually collect the taxes from international buyers. In the meantime, we expect high rates of sales growth to continue in the Canadian real estate market.

Across the GTA in 2015, there were 20,753 new condo suites sold and 20,709 resale transactions, an 18% increase from 2014[1] . Judging by what we’ve seen for September, a 26.7% increase in condo sales over 2015, the trend of rising sales is on the up and up. But we don’t see a market of greedy speculators; we see national and international interest and investment, residents and new immigrants buying and settling in the GTA’s affordable condos and townhouses. And we think it’s a good thing.

Welcome to Canada, international buyers

As in Vancouver, international buyers are only one factor impacting the rise of prices in Toronto’s real estate market. The other socio-economic factors include a shortage of housing supply, limited land for new development, and a growing population.

Nevertheless, the cities of Canada are prosperous, growing, and comparably more affordable than many other cities around the world, and people want to live here. Canada is a country founded on immigration from all parts of the world. Our multicultural communities are what we’re known for. It’s who we are.

For non-residents, the process of buying a home in Canada can be tricky, and it may become more difficult in the future. As a team of real estate professionals, with many immigrants among us, we know this process from both sides of the border. That’s why we’ve put together an international buyer’s guide to answer the questions we hear most often.

International Buyer's Process Overview

Can I buy real estate in Canada if I'm not a Canadian citizen?

Anyone can buy real estate in Canada , from any country. Buying property in Canada, however, has no impact on immigration or citizenship status. If you want to become a Canadian citizen, you’ll have to qualify under Canadian Immigration Laws .

Do I need to work with a licensed REALTOR®?

It’s a smart choice for international buyers to work with a licensed Canadian REALTOR® . Someone who knows neighbourhoods and buildings, as well as developers, property managers, real estate lawyers, and Canadian banking institutions. Condo Pros in Toronto and Vancouver help with the whole process from searching for condos to signing the deal. We have many experienced agents who have helped international investors find homes in Canada.

Can I get a mortgage to finance my Canadian investment?

Yes , international buyers can get a mortgage in Canada. The best financing options will require a significant down payment between 35-50% . The banking institution will also often want proof of income and credit history to feel assured about future mortgage payments. As a rule, the sooner you move your money into a Canadian bank account the better, as most banks want the money secured for 30-90 days . You may want to work with a professional Mortgage Broker , who knows the banking institutions and can negotiate the financing options for you.

What types of Canadian taxes will I have to pay?

It’s always best to speak with a Canadian accountant about taxes in Canada. The Canadian Revenue Agency has a lot of rules and you’ll want to follow them. But here’s a general overview:

In Ontario, international investors pay the same property transfer tax as Canadian citizens . First-time homebuyers, who have never owned a home anywhere in the world and who are hoping to settle down with a primary residence, may be eligible for a tax refund up to $2,000. You can find more information here .

In B.C., international buyers must pay a 15% property transfer tax on all real estate transactions in the Metro Vancouver area.

A 25% withholding tax may be applied to international investors who are selling their property. Again, it’s best to consult an accountant.

Do I need to buy property insurance?

Before a bank agrees to finance your mortgage, they will need to see proof of home insurance, so you’ll want to get this as soon as possible . Contact an Insurance Broker. The price of insurance can often be more expensive for international buyers.

Do I have to be in Canada to sign the paperwork?

Most real estate deals for condos can be processed digitally, via Skype, etc. Our website makes it easy to search condos remotely, with price per sq.ft. analysis to help inform your decision. Our Condo Pros will help you place an offer and sign the paperwork. But Canadian banks will often require in-person signature to approve your mortgage. In case of your absence, you’ll want to set up an executed Power of Attorney to sign the paperwork in-person.

For more information and answers to many more questions, we recommend visiting Canadian Mortgage and Housing Corporation - Buying a Home. [1] Urbanation