Montreal Gazette

Newcomers’ ownership dreams drive market

The force behind Canada’s housing boom:

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Coming to Canada, part of the process is buying housing. You’ve got people coming from countries like China where they may own the house, but not the land. Owning a house is a very powerful thing for some people.

Newcomers’ dreams of ownership are a big reason for the industry’s rising prices, Garry Marr writes.

The mayor of Caledon, a town of about 60,000 northwest of Toronto, says government can try all it wants, but the dream of owning a home will persevere.

Allan Thompson should know. His town, like many others that ring around Ontario’s capital, has become a launching site for new communitie­s as people priced out of the core look to the suburbs (or what was once rural) for slightly cheaper housing.

An average new single-family detached home in the Greater Toronto Area (GTA) was $1,264,604 in 2016, according to the Building Industry and Land Developmen­t Associatio­n. But housing prices range from an average of $666,220 for a semi-detached home in Durham, northeast of Toronto, to $1.8 million for a detached home just north of the city.

“I remember I had this neighbour who was Portuguese,” said Thompson, who was a Caledon councillor for 11 years before becoming mayor two years ago. “He said to me, ‘For 20 generation­s back in Portugal, we all lived and rented houses in town. We had our sheep and our goats and our cattle.’ He said to me, ‘I was the first one ever to have a home.’ ”

That dream of homeowners­hip is central to the escalating prices in Canada’s housing market, especially in larger cities such as Toronto where immigrants tend to settle.

Even though worries about socalled foreign buyers inflating prices dominate some discussion­s about runaway housing prices, the housing boom is more likely being driven by new immigrants looking to get a piece of that Canadian dream. It’s a mentality that says home ownership is a sign you have made it.

Canada has a home ownership rate of about 70 per cent, one of the highest in the world, and immigrants are buying in.

A report from real estate consulting firm Altus Group Ltd. in January found that immigrants — defined as someone whose country of origin is not Canada — are purchasing one out of every two new homes in the GTA.

Matthew Boukall, senior director of residentia­l products and data solutions at Altus Group, said demand could get even stronger as the federal Liberals boost immigratio­n totals from the annual base target of 260,000 that existed from 2011 to 2016.

“The Liberal government has announced their immigratio­n targets will increase to 300,000 per year. The fact that half of our new home market is going to new immigrants and we are going to get (more) immigrants to Canada bodes well for the new housing market,” said Boukall, noting Toronto gets about 30 per cent of those immigrants every year.

Sales of existing Canadian homes continue to be hot and set another record in 2016. Numbers released Wednesday from the Canadian Real Estate Associatio­n show that sales activity in January 2017 was 1.9 per cent better than a year earlier.

The key problem in some markets is simply not enough homes on the market to satisfy demand.

This past week, Douglas Porter, chief economist at Bank of Montreal, said Toronto was in a housing bubble driven by foreign wealth, coupled with record-high demand and a shortage of detached properties.

Others say the bubble is less likely to pop anytime soon.

“The shortage of homes available for sale has become more severe in some cities, particular­ly in and around Toronto and in parts of B.C.,” said Gregory Klump, chief economist at the Canadian Real Estate Associatio­n. “Unless sales activity drops dramatical­ly, the outlook for home prices remains strong in places that face a continuing supply shortage.”

Royal Bank of Canada economist Robert Hogue said immigratio­n has been a driving force in the Canadian housing market for some time in the major markets where immigratio­n has been the strongest.

Hogue points to a Statistics Canada study released in December that showed how the earning power of immigrants begins to rise over time and, while it didn’t address housing, it’s easy to see how increased income could translate into home ownership.

The median employment income of immigrant tax filers who landed in 2004 was estimated at $16,800 in 2005 (one year after landing). The same cohort’s median income increased to $26,000 in 2009 and $33,000 in 2014.

“It takes time for immigrants to earn the same income as those born in Canada,” Hogue said. “I suspect immigrants buying today are not as much those that came in the last year, but those who got establishe­d financiall­y.”

Hogue said it’s unclear to him whether immigrants arriving in Canada today have more wealth and are entering the market more quickly. But the Altus survey found that 19 per cent of people buying new homes in the GTA do not take on a mortgage.

“Lucky them,” Boukall said with a laugh. “Are they foreign investors? If you’re asking me that, we don’t collect that informatio­n.”

How much foreign buyers — often really just speculator­s — have entered the Canadian market is a hot topic for both prospectiv­e homebuyers and government­s.

The British Columbia government clearly believes that foreign buyers are having an impact on the Vancouver market and slapped a 15-per-cent additional property transfer tax on them in August 2016. Prices there have since slightly declined while sales, already in decline, are off about 40 per cent from a year earlier.

The Toronto Real Estate Board (TREB) surveyed its members in December about foreign transactio­ns and concluded only 4.9 per cent of the market came from that segment.

All of which begs the question of whether foreign buyers are being confused with immigrant buyers.

“People are having the conversati­on in Toronto and it’s been much more intense in Vancouver,” Hogue said. “Don’t confuse the two. I’d like to comment on Toronto statistics, but other than the survey done by TREB, we don’t have much (data). In B.C., we’ve had data since June and I would say the percentage of buyers from out of the country has not been trivial.”

But Dianne Usher, senior vicepresid­ent of Royal LePage’s highend division Johnson & Daniel, said the real growth in the market has come from immigrants she calls “end users,” those who come to the country and plan to live in their homes.

“I’d say it’s happening in Toronto and Vancouver and then I would say Montreal,” she said, adding more immigrants are coming in with money, or are trying to get it out of their country of origin for good. “Canada as a whole is a safe haven because of the stable government, the education system, the healthcare system. We’re a destinatio­n and it’s going to continue.”

She adds immigrant buyers will continue to purchase properties in and around large cities partly because of work and educationa­l opportunit­ies, but also because large urban centres are what many are accustomed to.

The biggest problem might be meeting all the demand, especially if immigratio­n quotas are increased.

Brian Johnston, chief operating officer of Mattamy Homes, which has developmen­t projects in Caledon and throughout the GTA, agrees the supply side continues to drive prices. He figures he’s selling more than 50 per cent of his homes to immigrants.

With immigratio­n increasing, he said the solution is for government to create more low-rise housing to accommodat­e what is a growing segment of the population.

“Coming to Canada, part of the process is buying housing,” Johnston said. “You’ve got people coming from countries like China where they may own the house, but not the land. Owning a house is a very powerful thing for some people.”

In Caledon, the mayor doesn’t think the push into his city is going to ebb any time soon.

“From here on in, as we know it, our population is just going to keep compoundin­g,” Thompson said. “A lot of people are coming here from other parts of the world to live, quite a few of them don’t have mortgages. It tells you people are coming here by choice.”

 ?? MIKE FAILLE/NATIONAL POST ??
MIKE FAILLE/NATIONAL POST

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