VANCOUVER (Reuters) - A Canadian housing shortage, not a rush of foreign demand, is probably driving up property prices, the country’s housing agency chief said on Wednesday, as he warned against blaming overseas buyers for the decade-long market boom.
New government data shows foreign ownership is only a small factor behind the high prices, Canada Mortgage and Housing Corp Chief Executive Evan Siddall said in a speech at the Greater Vancouver Chamber of Commerce.
Foreigners have been blamed for driving up prices, particularly in Vancouver, Canada’s most expensive housing market, where locals believe wealthy Chinese buyers have made housing unaffordable for ordinary Canadians.
The housing agency said in a report on Wednesday that foreign ownership of Canadian condominiums dropped in 2016 after the introduction of a foreign buyers tax in Vancouver, and remains a fraction of overall ownership concentrated mostly in newer buildings.
The share of foreign ownership fell to 2.2 percent in Vancouver in 2016 from 3.5 percent in 2015, the agency said, suggesting that the August introduction of a 15 percent tax on foreign buyers in that city had dampened demand.
Buyers did not appear to have shifted to other cities where the tax was not imposed, as some analysts had predicted, with foreign ownership falling to 2.3 percent in Toronto from 3.3 percent a year earlier.
Siddall said the most important factor driving up home prices was a supply shortage, particularly in Vancouver, along with rising disposable incomes, immigration and lower mortgage rates.
“We cannot allow (housing) to become a wedge that divides us, separating neighbors and communities, and creating tensions between newcomers and those that have been here longer,” Siddall said.
Demand by foreigners for Vancouver-area homes dropped almost immediately after British Columbia imposed the tax on such purchases, but it crept back up in October.
The government has moved in recent years to cool the market, mostly among buyers, by tightening mortgage rules to make it harder to take on too much debt.
The Canada Mortgage and Housing Corp, which insures the bulk of mortgages issued by banks and other lenders, said last month there was strong evidence that many of Canada’s housing markets are overvalued.
Reporting by Andrea Hopkins; Editing by Meredith Mazzilli and Richard Chang