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Foreign Buyers May Be Buying Up Canada’s Luxury Homes, CMHC Chief Says

Trying to track foreign ownership of pricey housing in Toronto and Vancouver

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Aerial view of the Toronto skyline.

David Cooper/Toronto Star/Getty Images
Aerial view of the Toronto skyline.
David Cooper/Toronto Star/Getty Images

OTTAWA—Canada’s national housing agency says it is looking into how to track foreign ownership in the country’s real-estate markets, saying it is possible that overseas buyers account for a substantial portion of demand for luxury homes in Toronto and Vancouver. Canada Mortgage and Housing Corporation President Evan Siddall said the agency may turn to local real estate agents, developers and land registry offices to obtain information about annual residential sales to foreign buyers. He made the remarks in the text of a speech he delivered on Tuesday in Toronto. “The presence of foreign investment can also contribute to housing market vulnerabilities, such as overvaluation,” he said. “In Vancouver and Toronto, for example, it is very possible that foreign buyers account for a substantial portion of the demand for pricier, luxury single-family homes.” Home prices in Vancouver increased by nearly 14% in September from a year earlier, according to the Canadian Real Estate Association. In Toronto, prices climbed just over 10% from the previous year. Evidence of overvaluation and overbuilding has increased in several cities to the point where home prices “are not fully supported by economic and demographic factors,” a recent CMHC report says. But Mr. Siddall’s comments mark a shift in tone on the role of foreign investors by Canadian authorities, who have to date raised questions about foreign buyers, but haven’t suggested as strongly that these buyers are driving markets. However, Mr. Siddall emphasized the need for more information. “A lack of accurate and reliable data makes it difficult to determine if or how foreign investment may be affecting the market,” Mr. Siddall said, according to the text of the speech posted on CMHC’s website. “Most of the available information is anecdotal. And the problem is that many foreign investors may prefer to hide their ownership.” Both domestic and foreign investment activity in housing markets can be speculative, Mr. Siddall said. However, he said, foreign investment may be more mobile and subject to capital flight, potentially increasing volatility in Canada’s housing markets. He cited a recent case study by a Vancouver-based urban planner who found that two-thirds of luxury homes sold in three West Vancouver neighborhoods were bought by people with Chinese names. CMHC controls about two-thirds of the country’s mortgage-insurance market. Under Canadian law, mortgage insurance is required of anyone buying a home with a down payment of less than 20%. That insurance is fully backed by the Canadian government, meaning taxpayers, not lenders, are on the hook in the case of defaults. CMHC also sells securities backed by pools of insured mortgages that provide additional financing to mortgage markets to help Canadians buy a home. Earlier this year, Mr. Siddall said he was comfortable with the level of risk on the agency’s books, and vowed to take further measures to ensure financial stability. But last month, CMHC issued one of its strongest warnings to date about the risk of overheating in housing markets across the country. It said properties were overvalued in 11 of 15 major Canadian centers. Mr. Siddall also said Tuesday that CMHC was working closely with the Department of Finance, the Bank of Canada and the country’s banking watchdog to contain the risk posed by high levels of household debt. He added he’s still exploring ways to share housing-market risks more equitably within the financial system. In a separate news conference here Tuesday, newly appointed Canadian Finance Minister Bill Morneau said he would refrain from discussing the state of Canadian housing, adding he was still being advised by government officials. Write to Paul Vieira at paul.vieira@wsj.com This article originally appeared in The Wall Street Journal.