Canada’s
housing agency is set to publish results of a Toronto and Vancouver
condominium-owner survey as it seeks to address economist and policy maker
concern that not enough is known about what’s driving price gains, documents
show.
Canada
Mortgage & Housing Corp. surveyed condo investors — those who purchased at
least one condo that isn’t the owner’s primary residence — in August and
September 2013, according to documents obtained by Bloomberg through an Access
to Information request. Most of the content, including the number of people
Ottawa-based CMHC contacted, the survey questions and the results, was
redacted.
Calls
are growing louder for more detail about who’s investing in the nation’s condo
market, including how much is owned by foreigners, and what the risks are.
Policy makers have warned for the past half decade a bubble may be forming in
Canadian real estate, and some analysts have said prices are as much as 20%
overvalued.
The
lack of condo-ownership data in Canada “is a shortcoming,” Sal Guatieri, senior
economist in Toronto for Bank of Montreal, said by phone July 22. “The more
data, the better the quality of the data, the better the policy making.”
CMHC’s
Condominium Owners Survey will be “factual and provides a descriptive profile
of condominium investors,” the documents show. The agency expects to release
the results of its survey, which doesn’t give an estimate of the share of
foreign and corporate investors, in early August, according to a July 25 e-mail
from spokesman Charles Sauriol.
Lowest
Rates
National
home sales reached the highest level in four years in June and prices in
Toronto and Vancouver are up 12% and 29% on the year, a realtor report this
month showed. Historically-low mortgage rates are adding momentum, and the Bank
of Canada has kept its benchmark policy rate at 1% since 2010.
The
survey to be released in August is CMHC’s second attempt. The agency conducted
a telephone survey of Toronto and Vancouver condo investors in August 2012 in
response to “industry concerns about the extent and nature of condominium
investment and its sustainability,” according to a mostly- redacted August 2012
CMHC board presentation. The survey intended to determine what investors
planned to do with their units, how long they intended to hold them, what would
motivate them to sell, how much they put down and the source of the
downpayment.
That
survey wasn’t publicly released because it “didn’t produce results that were
reliable enough,” CMHC’s Sauriol said in his July 25 e-mail.
Foreign
Investment
The
housing agency is monitoring foreign investment in real estate by tracking land
registry data, hosting investor round tables and conducting surveys into
vacancy rates and rents, according to the 2012 board presentation.
“There
is no comprehensive data source of foreign investors in the Canadian housing
market,” CMHC Interim Chief Executive Officer Douglas Stewart said in an Aug.
21, 2013 memo to Canada’s Employment Minister Jason Kenney. “Although some
estimates can be gleaned from some municipal land registries, those estimates
are not reliable.”
Stewart’s
memo was in response to Kenney’s questions from a CMHC briefing about foreign
investment in the Canadian housing market, the documents show. Kenney also
asked about the impacts of changes to the Immigrant Investor Program in
Vancouver and Australia’s foreign investment policy.
Investor
Roundtable
Participants
at a Toronto condo investor roundtable that CMHC hosted in March 2012 cited
unidentified brokers who estimated foreigners with no ties to Toronto account
for about 2% to 3% of total condo purchases in the city, according to meeting
minutes that don’t include participant names or affiliations. The minutes,
included with the other documents obtained by Bloomberg, had already been made
public.
Fifteen
percent of the stock managed by rental management companies is owned by
foreigners, based on filings of non-resident tax forms, according to the
roundtable minutes.
Demand
for Toronto condominiums pushed prices to new highs in the second quarter. The
average price rose 2.8% from a year earlier to a record $554 per square foot,
even as the number of high-rise homes in the pre-construction, under
construction and occupancy phases reached a high of 105,027 units in the city,
Urbanation Inc., a Toronto-based consulting company, reported July 25.
Condominiums
account for more than 1.6 million Canadian households, or about 12%, and more
than half of those are located in the three largest markets Toronto, Vancouver
and Montreal, according to Statistics Canada data.
“The
gap between the importance of the real-estate market to the economy and the
lack of publicly available information on it is mind-boggling,” Benjamin Tal,
deputy chief economist at Canadian Imperial Bank of Commerce, wrote in an April
note to clients. “What is the share of foreign investors in the condominium
market?”
Bloomberg.com
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