In the past year, both BC and Ontario’s governments have unveiled foreign-homebuyer taxes spanning their hottest markets.

In early August last year, BC rolled out a tax of 15 per cent on non-resident homebuyers when they purchase residential property anywhere in Metro Vancouver.

Then, this April, Ontario followed suit with the announcement of a similar tax for the entire Greater Golden Horseshoe, a large swath of southern Ontario that includes the Greater Toronto Area.

While the dust is still settling on Ontario’s tax, some are looking back at BC’s for insights into how things will play out in the country’s biggest provincial real estate market. Here are 7 charts that examine the levies.

1. Foreign buyers are driving Toronto and Victoria home prices

bmo-economics

What’s going on here? Index prices for Toronto, Victoria and Vancouver are charted here, with the vertical black line representing when BC’s government applied the foreign-buyer tax for Metro Vancouver.

The takeaway: After the tax, Vancouver prices tumbled while Toronto’s continued to shoot up, suggesting foreign buyers may have turned attention to that market. “In case there was any doubt what force is at play, note that Victoria has tracked closer to Toronto’s behaviour than Vancouver’s,” writes BMO Chief Economist Douglas Porter.

2. Foreign homebuyers didn’t just look to Toronto and Victoria

foreign-buyer-montreal

What’s going on here? Canada Mortgage and Housing Corporation (CMHC), Canada’s national housing agency, looks at the number of foreign homebuyers active in the Montreal market in three quarters following BC’s non-resident levy, as well as in the same period a year before.

The takeaway: “This suggested a possible very slight shift in demand from Vancouver to Montreal after the introduction of the foreign buyers tax on housing in Vancouver,” reads CMHC’s most recent Housing Market Insight report.

3. Home price appreciation versus overall household credit growth

foreign-investment-toronto-vancouver

What’s going on here? Historically, home prices and household credit usually track in line with each other, as homebuyers take out mortgages to fund their purchases. Historically.

The takeaway: “Something besides domestic borrowing has clearly fanned the flames,” says BMO Chief Economist Douglas Porter. That suggests foreign-buyers are playing a big role in price gains.

4. How local Greater Toronto Area markets reacted after the foreign-homebuyer tax announcement

neighbourhood-toronto-foreign-buyer-tax

What’s going on here? John Pasalis, co-founder of the Realosophy brokerage and “the Toronto broker who actually wants to cool real estate demand” compares sales activity across local GTA markets in the month after Ontario Premier Kathleen Wynne announced the Fair Housing Plan with the same month last year.

The takeaway: The big dropoff in sales in May (down 20.3 per cent from one year earlier) wasn’t equally spread across all markets. Also: “the astute observer might point out that the bulk of the decline in sales was seen in areas popular with buyers from mainland China,” writes Pasalis. But, he adds, he’s “not convinced” that this is purely a sign of foreign investment trailing off.

5. GTA investor activity in 2012 and 2016

gta-investment

What’s going on here: Doubting the big sales drop in May could entirely be attributed to foreign investment, Pasalis looks at more general investment. Pasalis’ profile for investors is buyers who list their new homes for rent on the MLS not long after taking possession themselves.

The takeaway: The neighbourhoods that saw the largest drop in sales after the Fair Housing Plan was announced (chart 4) also had some of the highest levels of investment. “This type of speculative behaviour has virtually disappeared over the last 45 days. Buyers are starting to see for the first time in a long time that real estate prices can actually go down,” he concludes.

6. Toronto home prices power through foreign-buyer tax headwinds in May

toronto-home-price-index

What’s going on here? The Teranet-National Bank House Price Index tracks home prices in 15 major urban housing markets since 2006. The index is based on the repeat-sales methodology. This measure only includes homes sold more than once and ignores some including those that have high resale rates or have undergone considerable renos that change the property type.

The takeaway: “The Non-Resident Speculation Tax… apparently had a dampening effect on sales and induced a rush to put homes on sale, but its effect on home prices remain to be seen,” writes National Bank Senior Economist Marc Pinsonneault.

7. Toronto vs. Vancouver: Why a GTA foreign-buyer tax may have the bigger impact

toronto-vancouver-tax

What’s going on here? TD Economics plots monthly new listings in the Greater Toronto and Vancouver areas all the way back to 1990.

The takeaway: “While early yet, a key difference between current patterns in the GTA and last year’s GVA experience is the jump in resale supply in the former market,” notes TD Economics. This difference, combined with a projected increase in interest rates, has the bank suggesting the GTA market will be impacted more heavily by a non-resident tax than Vancouver was last year.

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