How Foreign Real Estate Investors Are Changing Canada's Skyline
Toronto is the Canadian Dubai. Developers there are building 97 residential towers, more than any other city in North America, according to Emporis GmbH. It’s been building like mad for much of the last five years, and there is no end in sight. Fitch Ratings said recently that housing prices in Ontario are 25% overvalued and condo market prices may decline as much as 10%. But they didn’t single out Toronto.
What do foreign buyers see? They see a country that charts in the top 10 of best urban centers to live. They see they can buy middle class housing for$550 to $750 per square foot in new developments on the “center ice” of Toronto, homes for half a million dollars that would go for double that in Manhattan.
As far as luxury properties go, the luxury properties with brand names like Trump slapped by the lobby door on Bay Street are cheaper than they are in any city with decent bragging rights and caché.
Canada’s housing market for investors remains stable, with risks to the upside. Land prices are one contributing factor. Locals are moving upmarket, and wealthy foreigners – in this case Chinese and Indians – are depositing cash in their adult child’s bank accounts to buy real estate. Immigration into Canada is expected to have an impact on home prices for years to come. Supply is limited in the tier one cities like Toronto, contributing to double digit price increases. In March, Toronto home prices rose 10% on an annualized basis.
Canada ranks a distant third behind the U.S. and Australia in terms of top destinations for Chinese real estate investors, but new project proves if you build it, they will come.
The same holds for Vancouver.
In January, a newly formed Shenzhen based real estate investment firm called Brilliant Circle Group acquired 232 acres of land along the waterfront in Vancouver. It was owned by Imperial Oil and sold for an undisclosed amount. Similar parcels in the area sold for under $1 million.
In a city where skyscrapers are not the norm, five new luxury residential towers are being built. According to Statistics Canada, 34,500 new immigrants are expected to settle in British Columbia this year, rising to over 45,000 in three years. Of that total, 65% will come from Asia Pacific, with the bulk of them coming from China. They’ll be competing with the locals and the Americans for trophy properties.
“Our real estate market has seen a steady increase over the last 18 years with no major correction. Even in 2008, it was just a blip,” said Ross McCredie, President and CEO of Sothebys International Realty Canada in Vancouver. “It all comes down to net migration of Canadians moving to Vancouver, foreign immigration and foreign ownership. There’s a lot of money changing hands here.”
Last year, the West side of Vancouver had around 25% to 30% foreign buyers, mostly all of them from China, McCredie told FORBES.
This number is expected to increase. As China’s government allows its locals greater access to foreign markets, individuals will use those laws to diversify their holdings out of China. And for the individual investor, prime real estate in stable countries with safe cities near brand named educational institutions will sell every day of the week.
Canadian property buyers have traditionally been the incumbent buyers of real estate assets, but a growing mix of international developers from China are seeking to park capital there as well.
“A lot of our Chinese buyers have been living in Canada almost all of their lives and have businesses still in China, through family,” said McCredie. “They didn’t sever ties with the mainland. So what we are seeing in Canada, with the currency weaker that it has been at 80 cents to the dollar, they have had the extraordinary benefit of growth in China in the past and they are still participating in the growth in China today. A lot of that money trickles back in to real estate.”
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