Upward investing (Foreign investoment in TO real estate)

Discussion in 'Real Estate General Discussions' started by ganjavih, Jul 22, 2006.

  1. ganjavih

    ganjavih Guest

    Upward investing

    Foreign investors remain bullish about Toronto's residential real estate
    Jul. 22, 2006. 01:00 AM
    ELVIRA CORDILEONE
    STAFF REPORTER

    Dublin residents Theresa and James Hayes picked up a downtown Toronto condo last November without ever setting foot inside the project's sales office or taking a look at the Yonge and Carleton neighbourhood where it will be located.

    When they made the purchase, they joined a teeming pool of foreign buyers enjoying the financial rewards of Toronto's real estate market.

    "It sounded like a great place," says Theresa Hayes, referring to The Met, a two-tower project by Edilcan Development Corp.

    The couple decided on a two-bedroom apartment on the 31st floor of the second tower, which Hayes said cost "more than $200,000" and which they expect will be ready for occupancy in mid-2008.

    The first tower, at 43 storeys, has reached two-thirds completion, says Edilcan principal, G.P. Di Rocco.

    But it's difficult to determine how big a chunk of the Toronto condo pie lies with investors, both foreign and local. They could represent as little as 19 per cent of the booming market or as much as 40 per cent, depending on which data you view.

    For example, Canada Mortgage and Housing Corp.'s 2005 condominium survey indicates that investors (foreign and domestic) owned 36,000-plus units, or 18.7 per cent of the GTA's rental housing stock. However, these numbers don't include pre-construction sales or buildings that are newly occupied but not yet registered.

    It also fails to distinguish between Canadian and foreign buyers. In fact, no agency or analyst tracks offshore interest in Toronto real estate.

    CMHC's Toronto analyst, Jason Mercer, says the data isn't easily available because the people who respond to the survey on behalf of the condominium corporations and property management companies don't necessarily know which units foreigners own.

    And buyers of new units aren't required to tell the sellers how they intend to use their property, whether they will emigrate and live in it, use it as a part-time pied-à-terre or rent it out.

    Like many buyers from abroad, Theresa and James Hayes opted to buy at pre-construction prices, selecting a highrise project in Toronto's downtown because it sits close to transportation, shopping, entertainment and other services.

    Di Rocco wasn't sure how many foreigners had purchased units in his newest project.

    But his records place that figure at 10 per cent of The Met's more than 700 units — almost twice the number he'd anticipated.

    "They hail from countries such as Trinidad and Tobago, Venezuela, Greece, Ireland, Italy, Japan, China and the U.S., and they have purchased suites ranging in price from $120,000 to over $680,000," Di Rocco says.

    Hayes said the family has plenty of time to decide what to do with their suite. They may keep it as a good place to spend vacations or rent it out.

    In fact, investors who choose to rent provide another clue as to the number of foreign investors in the condo marketplace.

    Horst Lietz, the broker of record for Brookfield Canada Realty, manages 300 residential units for individual investors in the GTA.

    If his management portfolio represents a cross-section of condo investors, then foreigners hold 40 per cent of the region's rental units.

    But even in the absence of hard numbers, analysts concur that foreign investors remain bullish about Toronto real estate.

    Condo analyst Barry Lyon, president and senior partner of consulting firm N. Barry Lyon Consultants, says foreign buyers not only tend to prefer products in new projects, they also like to buy them during the pre-construction phase to take advantage of the lower prices.

    "They like getting in early and are prepared to wait," he says. "They've become very sophisticated. Once they identify a project, they move in en masse. Those in early have a healthy appreciation of value —and they hold, rather than flip (the property)," he says.

    Lyon pegs investors at 20 to 25 per cent of the condo market, but notes the ratio of investor to owner-occupied units can vary from 10 to 50 per cent in individual buildings.

    Housing economist Will Dunning suggests the average is closer to 30 to 40 per cent in new buildings.

    "In the last six years, there have been waves of buying, and we're now in a strong wave," he says.

    Toronto realtor Pat Baker, CEO of Baker Real Estate, whose firm has a wide network of affiliates promoting Toronto's new residential projects overseas, says the city's growing profile on the world stage has fuelled a renaissance in the local housing market.

    In the past several years, buyers from East Asia and Europe started to enter the market for the first time.

    "Most are buying to live in them — immigrants or part-time residents — or buying for a child that's a student," Baker says.

    Others have a portfolio of inventory in areas with the strongest market pull, such as downtown nodes in Toronto, Mississauga and Markham, Lyon says.

    "They're buying smaller units to rent at break-even prices."
     
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  2. InaneHuman

    InaneHuman Guest

    Sounds like Miami or Vancouver.
     
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  3. I'd worry if 40% of the houses on my street were rental, and owned by people offshore - there goes the neighbourhood. But I doubt if most condo owners know, or care, who lives next door to them - renters or owners - any more than they know whether their monthly fee provides value for money.
     
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  4. Ed007Toronto

    Ed007Toronto Guest

    I know about half the people on my floor. Any different than on a street with houses?
     
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  5. I know that my monthly fees provide value for money. Like Ed, I know about half the people on my floor, and others in the building.

    Whether they occupy their apartments as a result of paying rent or a mortgage is really no buisness of mine.
     
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  6. If 40% of the homes on the avenue where I live suddenly became rental - and owned by investors, many offshore, as the article says is the case with many condo buildings - it would dramatically change the character of the neighbourhood.

    Though we don't have a secret handshake or anything, house owners are quite different from the roomers or renters on the street since we are responsible for our properties, and they aren't. A definite class system exists. We secretly rejoice when another rooming house bites the dust and is returned to single family occupancy. I know it sounds kinda creepy and Stepford-ish but there you are!
     
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  7. Mike in TO

    Mike in TO Guest

    ^ Every building is different, just like many streets. Some primarily attract owners who will occupy the units, while others will be investor driven.

    Something like Maple Leaf Square is going to have a significant amount of investment buyers while many smaller developments or buildings are not going to be investment driven.

    Investors usually look for buildings on the subway line right in the core.
     
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  8. InaneHuman

    InaneHuman Guest

    Re: Upward investing (Foreign investment in TO real estate)

    I think the tipping point for a possible detrimental situation for a condo building comes when greater than 50% of the owners are absentee landlords. They may then vote as the majority to defer building maintenance, etc., strictly on pocketbook issues and not care about the quality of life in the building. Up until this threshold is reached, I don't think it matters much having some renters.
     
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  9. Davidackerman

    Davidackerman Moderator Staff Member

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  10. Peter S

    Peter S New Member

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    This article provides some interesting viewpoints on the situation that is unfolding in the Toronto and Vancouver real estate markets at the moment. According to the Real Estate Board of Greater Vancouver, the average price of detached Vancouver homes is down 17% in August (1 month alone). This is the 3rd most read article under "Real Estate" on SeekingAlpha.

    https://www.linkedin.com/pulse/toronto-vancouver-home-prices-verge-25-collapse-mark-petrov
     
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  11. Davidackerman

    Davidackerman Moderator Staff Member

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  12. cdr108

    cdr108 Senior Member

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    self serving article by Julie Di Lorenzo who is the president of Diamante Urban Corp., a real estate development company.

    for years, many developers and realtors stated that foreign buyers are minimal in pre-construction sales, i.e. 5 to 10% of sales.

    if they were truthful and accurate, then why the huge push back that would only affect a minimal number of units/sales??

    local buyers are typically required to make a 25 % down payment - 5% in 30 days, 5% in 180 days, 5% in 365 days, 5% in 540 days and 5% on occupancy.

    as little as 5 % down payment typically occurs on remaining inventory units when a condominium project is near completion.[/QUOTE]




    current dt residential condominium prices are ~$750+ psf; which is highly over priced

    RETAIL cost for hard construction per Insurance Bureau of Canada and Altus Group (for structure and mid-range finishes, which most are) is ~$250-300 psf (excluding land); so it is much cheaper for developers who also have economies of scale. their cost is closer to ~$170-200 psf

    land value is not as expensive or large a component of price when many high-rise projects are built at 30x lot area.


    hmmm ... funny we don't hear the same type of concern from developers when they pass $10,000+s unexpected costs onto buyers. I've heard story where buyer of 1 bedroom unit received $50,000 bill upon closing for inflated development fees and the developers lawyers' legal fees, etc.


    Considering many of those nations have their own restrictive foreign ownership policies, then we should do the same and forego the tax if it is discriminatory.

    http://www.cbc.ca/news/business/real-estate-housing-foreign-buyers-1.3479508

    http://www.macleans.ca/economy/economicanalysis/how-the-rest-of-the-world-limits-foreign-home-buyers/

    https://betterdwelling.com/city/toronto/7-places-tax-foreign-property-investors/

    China
    Having a population of over a billion people would put any country in a housing crisis, so it’s no surprise there’s a lot of property rules in China – including ones that target domestic owners. Foreigners are allowed to purchase only one property for their own personal use, after having spent one year in the country. After that, if you become a permanent resident, you’re allowed to purchase one additional property for personal use.

    Thinking of skirting the restriction using a shell company? Not so fast, the Chinese government conducts regular audits and foreign companies must use the property they reside in, or risk having it taken away.


    Australia
    The Australian government recently appointed a Foreign Investment Review Board to review and approve purchases of residential homes in the country, amid growing concerns that non-residents were driving up prices. The criteria for approval of these residential purchases is murky, but the board isn’t just for show. They have forced the sale of 27 homes, investigated the purchase of 1,300 properties to date, with another 800 on the their list to go.


    United Kingdom
    In 2014 a study revealed that 50,000 homes in London were sitting empty, while Londoners were struggling to find affordable housing. There was a lot of discussion on how to best handle the issue, but it wasn’t until last year that they took the first step in actually aiming to curb it. In April of 2015 they passed a law levying a new tax requiring up to 28% of the sale of the property be paid to the government – in June of 2015 they saw one of the largest declines in UK housing prices in months… I’m sure that’s just a coincidence right?


    Switzerland
    The Swiss have always had strict rules regarding housing, especially foreign ownership, with each canton (that’s a township if you’re not French-Canadian) assigning annual quotas and requiring approval before being sold to foreign owners. If approved, you can use it as a personal residence only, so forget your dreams of being a landlord in Switzerland.

    Fun fact, not even the Swiss are allowed to build homes over 1,000 sq. m. without a special permit – so there aren’t a lot of Bridle Path style houses to choose from. Sad, I know.


    Mexico
    Mexico established a law in 1917 prohibiting foreign ownership of land within 50 kilometers of the coast or with 100 kilometers of an international border – out of fear that Americans would flood their border (they should have built a wall and made the Americans pay for it). Despite this, a constitutional amendment made in 2013 allows the purchase of land through a legal loop hole called a fideicomisos (trust) ownership, where the bank holds the deed to the property and the foreign owner renews the rights to the land every 50 years.


    Hong Kong
    Hong Kong’s always been a dense city, but it wasn’t until 2010 that they started to really tackle the problem of foreign ownership. Non-residents pay an ad valorem tax that starts at 1.5% on properties under HK$2,000,000 (CA$300k), up to 8.5% HK$20,000,001 (CA$3.3M). Additionally there’s a 15% “Stamp Duty” on the purchase of land. A tax of 10-20% is also levied on anyone that sells a property less than three years after purchasing, effectively preventing flipping. That’s probably why we’ve never seen Flip or Flop Hong Kong.


    Canada
    Yes, foreign ownership restrictions exist in Canada already. Well, kind of. In PEI any non-resident (this includes us in Toronto), can’t purchase more than five acres of land, or more than 165 feet of coast land. While not terribly restrictive (unless you want to build a coastal mansion for a retreat), this does serve as an existing framework to look at.

    Additionally Alberta, Saskatchewan, Manitoba, and Quebec have restrictions on the purchase of farmland by non-residents.
     
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  13. W. K. Lis

    W. K. Lis Superstar

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    The City of Toronto should make it mandatory that the number 4, 13, (14, 24, 34, 44, etc.) be included in all new addresses, suite numbers, floors, etc..
     
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