Garry Marr – Financial Post

Some of the country’s leading developers shared their own statistics on the composition of today’s condominium buyers and the consensus is foreigners are a small minority of the group.

“There are a lot of myths in the condominium industry,” said C. Hunter Milborne, of Milborne Real Estate Inc., at the Queen’s Real Estate Roundtable in Toronto. “One of the myths is that the predominate buyers are foreign investors.”

Comment: And who knows better? Those who sell to them or those who don’t?

The subject has long been the source of speculation with the fear that foreign buyers are propping up the high-rise sector, inflating prices and could ultimately fuel a crash if they suddenly moved out of their investments.

In late 2014, Canada Mortgage and Housing Corp. produced data that showed 2.4% of Toronto high-rise units and 2.3% in Vancouver were in foreign hands, figures that many still dispute.

Mr. Milborne acted for a recent Four Seasons condominium development in Toronto in which he says about 5% of buyers were foreign. He said the notion of high foreign ownership doesn’t hold water based on his findings that are backed up by contracts tracking a buyer’s connection to Canada.

Comment: So “experts” can doubt the figures all they want, the developers have names and contracts and paperwork proving where buyers are from.

“When we take an agreement of purchase and sale, we need a [social insurance number] and photo identification,” he said, adding lenders providing construction financing demand to know the origin of money before they go ahead. “We kind of know what percentage of buyers are foreign buyers.”

James Ritchie, senior vice-president of sales and marketing with Tridel Corp., which built its first condo in 1968 and currently has 5,400 high-rise suites under construction in the Greater Toronto Area, said of about 2,000 suites closed by his company last year only 2.9% of purchasers came from outside Canada.

“It really depends on where you are, the further away from the core the less interest you have from outside the country. The closer to the core, the taller the building, the more interest,” Mr. Ritchie said about foreign buyers.

He said of those 2,000 suites this firm closed last year, only nine defaulted and none was foreign bought.

“I think a lot this has to do with deposits. Anybody who lives in this country must deposit 20% on the transaction when it’s in pre-construction. That mitigates risk. The banks are adverse to it and so are we as prudent developers,” Mr. Ritchie said, adding the 35% deposit for foreign buyers is required because “there is no way to mitigate our loss for people outside the country. There are a lot of legal remedies that accrue to the developer if you are inside the country.”

Comment: And it is this small number of foreign buyers, putting down 35%, that the “experts” are saying will bring down the condo market.

Deposits are regulated by the government, but 20% for domestic buyers and 35% for foreigners has become the de facto standard between builders and banks before said buyer can count as a sale. Banks demand between 60% to 70% of a high-rise be pre-sold before providing construction financing.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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