Did you see this article in Tuesday’s Toronto Star?
Three of my blog readers emailed this to me, and it was making the rounds on social media all day yesterday, and still is today.
The bottom line, based on preliminary discussion, is that nobody believes the numbers that CMHC is feeding us. Perhaps CMHC is no longer able to accurately monitor segments of this insanely hot and complicated real estate market, or perhaps they have a different definition of “foreign investors.”
The report that CMHC put out was comprehensive, but the facts and figures are being called into question.
Do you think that only 2.4% of Toronto condos are owned by “foreign investors?”
Sue Pigg is one of my favourite newspaper reporters, and not just when it comes to real estate.
She’s always topical, and is never “a day behind” when it comes to real estate stories, like so much of the media out there. In fact, she’s often the first person to break a story, as was the case with these………interesting numbers released by CMHC on Tuesday.
Have a read of Sue’s article in full HERE.
Keeping in mind that Sue is a reporter who reports what’s provided, not a columnist who provides an opinion, I want to look at some of the sections of this article that many are calling into question, and wondering how CMHC does their “research,” and whether they are actually equipped with the right people and systems to delve into Toronto’s real estate market.
“For the first time, the Canada Mortgage and Housing Corporation has put a number on the percentage of condos across the country owned by foreign investors and says it’s highest in Toronto — at a mere 2.4 per cent.”
Okay, so CMHC is doing this “for the first time,” are they?
So there might be a steep learning curve here?
I think when we do something for the first time, we’re not quite as prepared or informed as we ought to be. And I think we know from experience that when we do things a second time around, we do better than the first.
As I’ll show below, I think the CMHC royally messed this up on their first attempt. Especially if after all their data-collecting and number-crunching, they think that only 2.4% of ALL Toronto condos are owned by foreign investors.
“The federal housing corporation asked condo corporations and property-management companies for 92,257 rental condos which of their units have owners with mailing addresses outside of Canada.”
Wait a second.
You’re telling me that the definition of “foreign ownership” is somebody who has a MAILING ADDRESS outside of Canada???
Yes, I just used three exclamation marks, which is usually reserved for a teenager writing a text message, since the idea of using mailing addresses outside of Canada to determine foreign ownership is something a child would do.
If you own a vacation property in Florida, you probably have a Florida address. But alas, you’re a foreign owner!
I have a bank account at US Bank in Idaho, and I use that to pay my bills down there. Does that make me a “resident” by some sort of backwards definition?
Holy moly. Words can’t describe.
Have a read at the comments below the Toronto Star article, and you’ll see that even the average anonymous basement-dwelling commenter can come up with the idea of having a Canadian address, even if you live abroad.
And beyond that, how do we actually define “foreign investment?”
What if somebody living in China sends $3,000,000 over to Toronto to a family member, who then buys pre-construction condos in his or her name, and NOT the name of the resident of China? Those units are “owned” by the Canadian resident, but the money came from abroad. That money is the “investment,” in my opinion, and it doesn’t matter who is on title.
When I was a bar-back at a nightclub as a teenager, their system for counting the number of bottles of beer sold in a night was to count the empties that had been stacked into boxes. This discounted any bottles which were broken, put into the garbage, and left in the bathrooms or coat check and tossed elsewhere. I wondered why they didn’t, you know, just count the bottles as they sold them!
That was a simple solution, and the solution for counting “foreign-owned condos” isn’t as simple. But clearly, counting Canadian mailboxes isn’t the answer.
“That number proved to be especially high in condo buildings close to post-secondary institutions such as the University of Toronto and Ryerson University where many overseas families like to send their children, CMHC researchers found.”
I might also add, “That number proved to be especially high in ANY condominium in the downtown core which is less than three years old.”
Foreign investors LOVE pre-construction condos, since it’s a good way to park money that they don’t want sitting in a bank in an unstable political climate, that may also have a rate of inflation that’s five times the rate of interest.
There are certain buildings in the downtown core which are potentially more than 50% owned by foreign investors.
“Even as some 14,000 to 15,000 new condos came on stream across the GTA this year — and some 29 per cent of them were put up for rent — Toronto’s downtown vacancy rate dropped from a historic low of 1.6 per cent last year to just 1.1 per cent this year, the survey found.”
I’d like to know where that 29% figure comes from.
What source does CMHC have for a unit “being put up for rent?”
Is this according to property managers? Because we know how silly those numbers are. When I see a condominium’s Status Certificate, and it says, “According to property management, 24 of 312 units were leased in 2013,” I usually double that number if it’s in a newer building, since very few owner/landlords walk down to property management’s office and hand in a copy of the lease, like they’re supposed to.
In any event, I’m more surprised to see that the vacancy rate dropped, since I found this to be a soft year for the rental market. I found that most people were buying instead, given how low interest rates are, and would-be renters want to catch a piece of this seemingly never-ending real estate uptick.
I’m not alone in my feelings on the rental market, as this has been a point much discussed with my colleagues. I had trouble with several rental listings this year, and several of them were listings I’ve leased in previous years with no issues.
Perhaps the “drop in vacancy” is because a larger percentage of units, specifically those owned by foreign investors, are being deliberately kept vacant, and thus they don’t count in the statistic?
“We’re more bullish on rental demand than we are on ownership demand going forward. That’s great news for investors and the condo market,” says Tsiakopoulos.
Agree to disagree.
As I said above, I found the rental market to be slow this year, despite whatever numbers you can provide to the contrary.
And since when is CMHC a real estate cheerleader? “That’s great news for investors and the condo market,” is it? How about putting that on a large piece of bristol board and bringing it to a Leafs game to show to the TV cameras?
“About 34,000 new households a year are created in Toronto through immigration and in-migration from other provinces — something that’s also likely to increase as slumping oil prices impact the Western economy. Of those, about 11,000 are renters, Tsiakopoulos says.”
This is the second-most interesting statistic of the CMHC report, after their questionable 2.4% foreign-ownership figure, of course.
34,000 new households are created in Toronto each year!
And suddenly, the idea of 20,000 new condos coming onto the market doesn’t sound like saturation, does it?
I remember TREB’s Jason Mercer telling the Condo Committee, back in perhaps, 2009, that “The city can’t build fast enough to satisfy net migration, and that’s not going to change.” He added that this would put upward pressure on condo prices. I remember being astounded by that notion at the time, since the downtown core was one giant construction zone.
But Jason’s prophecy proved correct, as condo prices have risen steadily since then, and the supply still hasn’t caught up to demand, despite the idea of there being six construction cranes in view no matter which direction you look.
“The percentage of foreign ownership has become a key question in the industry – housing watchers largely believe the figure is closer to 5 per cent rather than CMHC’s 2.4 per cent – over fears that if the market turns, foreign owners will be more likely to put their units up for sale and flood the market.”
Good on the reporter, Sue Pigg, for adding in the idea that maybe, just maybe, the 2.4% number is low.
I spoke to Sue on Tuesday, and I told her that I think the number could be as high as 8-10%.
That’s a LOT, considering foreign investors won’t, and don’t, own any condos in buildings older than ten years old. So 0.00% of all those condos built in the 1970’s, 1980’s, and 1990’s are “owned by foreign investors.”
But as I said above, some buildings are owned 50% or more by foreign investors, and a large majority of downtown Toronto condos were constructed after 2000, so I have to think the number of foreign-owned units is upwards of 10%.
A brief discussion in my office in Tuesday had people suggesting as high as 20%, for what it’s worth.
Although perhaps the bigger question is: what percentage of NEW condominiums are owned by foreign investors?
That’s where the real estate bears, doomsdayers, and alarmists will feast off the data, and point out that the massive “correction” is just around the corner.
So whether you have an informed opinion, or just a thought on the matter, what do you think the percentage of foreign-owned condo units is in Toronto?
That’s “Toronto,” and not “downtown,” which is why that 2.4% number must seem low.
I spoke to an economist today who said, “The number is low, but the true number likely isn’t multiples of that number.”
Based on my gut feeling, I have to disagree. 6 per cent? 7 per cent? Or are we upwards of 10% at this point?
I welcome your estimates and guesstimates, and unlike CMHC, you don’t have to put them in a report…