A Foreign Investors Guide To Buying Toronto Real Estate

Overview: a foreign investors guide to Toronto real estate, with advice on taxes, mortgages, rebates, down payments, location, property types, and more.

Photo of Toronto skyline at night to appeal to foreign investors.

Thinking of buying property in Toronto?

Then you’ve come to the right place.

This guide will walk you through everything you need to know, from basics such as who can buy real estate in Canada, to more complex issues such as taxes, legal hurdles and obtaining mortgages.

Plus, you’ll also get advice on finding the right location, picking the right property, and hiring the right realtor.

Ready to get started?

Why Invest In Toronto Real Estate?

Toronto skyline at day time

What makes Toronto real estate such a great investment?

Several reasons.

With its high quality of life, excellent schools, economic opportunity, and multicultural values, Toronto is an amazing city to live, work and invest in.

Furthermore, Canada ranks #1 for quality of life—a title it has won 6 years in a row!

US News declares:

The North American country ranked first in both the Quality of Life and Social Purpose subrankings, meaning that it is seen as a stable and safe society in which individuals can develop and prosper, and is open, fair and equitable.

While Canada is full of amazing cities, Toronto is easily its most famous.

Besides being Canada’s most populous city, Toronto is also home to the nation’s best shops, restaurants, museums, universities, galleries, landmarks, and more.

Finally, more than half the city’s population was actually born outside Canada—showing just how welcoming it is.

Who Can Invest In Toronto Real Estate?

Man holding question mark for foreign investors.

Are there any rules or limits for foreign investors? (Pixabay)

According to Investopedia:

There is no residency or citizenship requirement for buying and owning property in Canada. …Non-residents can also own rental property in Canada, but need to file annual tax returns with the Canada Revenue Agency (CRA).

In short: foreign investors can buy any property they want in Canada, regardless of citizenship or residency status.

Just how common is it for non-citizens to own property in Toronto?

Not as common as you would think.

According to Livabl:

The data from the report found that non-residents owned a mere 3.4 per cent of all residential property in the GTA… The numbers were highest in the condo market, however, with Toronto coming in at 7 per cent.

So foreign investors own only 3.4% of all GTA homes, with Toronto condos being the most popular.

And where are most of these buyers coming from?

Data from the Canadian government shows that 70.6% of foreign buyers are from China, followed by America at 4.6%, and India at 3.6%.

Down Payment Rules for Foreign Investors

Close up of Europe on globe.

There’s different rules for different countries (Pixabay).

According to Mortgages.ca:

If you’re living anywhere other than Canada or U.S…your down payment must be at least 35 per cent of the purchase price.

However, our neighbours to the south have a unique advantage.

Wise.com informs:

…if you’re a US citizen or resident buying a first Canadian home to live in, rather than an investment to rent out…a down-payment of 20% may be accepted in this case.

On the bright side, foreign investors have access to the same historically low interest rates as Canadian citizens.

Foreign Investors & Taxes

Calculator, pen and paper showing different tax rules for foreign investors.

Foreign investors are also subject to special taxes (Pixabay).

In 2017, Ontario passed the Non-Resident Speculation Tax (NRST), a 15% tax on the purchase of residential properties by foreign investors.

There are certain exceptions to the tax.

For example: you don’t have to pay the tax if you’re buying property with a spouse who’s a permanent resident or citizen.

You may also be entitled to a rebate after paying the tax if:

  • The property is your principal residence and you move in within 60 days of closing
  • You become a permanent resident within 4 years of buying the property
  • You’re an international student enrolled at an Ontario school for at least 2 years
  • You’re a non-resident with a valid work permit working at least 30 hours a week

Foreign investors who plan on renting out their property should also be aware of the upcoming Vacant Home Tax.

According to Global News:

Homeowners who are not Canadian citizens or permanent residents would have to pay an annual tax of one per cent of the value of residential real estate that is considered to be vacant or underused.

The measure also requires foreign investors to file a declaration on the use of their property, with “significant penalties” for failing to do so.

Advice On Investing In Toronto Real Estate

Toronto panorama showing choice of homes foreign investors have.

Now comes the fun part: finding that perfect property.

The best decision you can make is hiring a professional realtor who lives in and knows the area.

Why?

Because local knowledge is crucial to finding your ideal home.

The Canada Mortgage and Housing Corporation (CMHC), an official government organization, strongly recommends it, stating:

Real estate agents will listen to your needs, show you suitable homes to visit, and negotiate on your behalf to help you get the best possible deal. They can also provide you with previous sale prices of comparable homes and information about neighbourhoods, as well as arrange the home inspection.

Realtors also have access to “information on the market that you don’t have.”

Here’s some of the ways a real estate agent can help you…

Finding The Right Location

Traffic along Chinatown Toronto with CN Tower in background

Did you know Toronto has 3 Chinatowns? (Mark, Flickr)

It also contains a Little India, Little Portugal, Little Italy, Little Toyko, Greektown, Koreatown and countless other ethnically diverse neighbourhoods.

Perhaps you want to live in a neighbourhood that speaks your language, serves your food, and celebrates your culture?

For example, a Chinese buyer may be interested in a predominantly Cantonese-speaking neighbourhood, such as Riverdale or North York.

Or perhaps you’re a young couple who wants to experience the city’s thrilling nightlife, arts and culture?

In that case I’d recommend a neighbourhood like the Entertainment District, King West or Yorkville.

Or maybe you’re a young professional who wants access to the best job opportunities in Toronto?

There’s no better location than Bay St for finance, Liberty Village for tech, and University Ave for healthcare.

Since education is the #1 reason Chinese investors buy Canadian real estate, consider a condo on University Ave or College St.

Both are just minutes away from the University of Toronto and Ryerson University.

Whatever your needs, a real estate agent with deep local knowledge can help you find the right location.

Finding The Right Property

Condo townhouse for foreign investors.

Are you looking for a house or condo? A residence or rental income?

A realtor can help you find the perfect property depending on your needs.

For instance, some buyers are looking for a place to live, while others are looking for rental income.

Although detached houses are great for families, they’re rather expensive at an average price of $1.7 million.

On the other hand, condos are better for young professionals and cost about a million dollars less!

The most important step a good realtor can take is to look at past sold listings in the street and surrounding area.

By comparing prices, they’ll have a clearer idea of how much you should pay for the property.

Whether you plan on living in the property or renting it out, a realtor can also calculate the cost of upgrades, negotiate with contractors, and ensure the necessary renovations are made.

After all, since foreign investors live in another country, they need a proxy to do everything on their behalf.

Home Inspections & Status Certificates

magnifying glass on green background

How can you be sure your investment is not wasted? (Pixabay)

By doing a home inspection by a certified professional.

The CMHC explains why this is so important:

For a fee ($300 and up), an inspector will make a detailed inspection of the property. When you receive the home inspection report, you and your real estate agent will have to discuss how required repairs, if any, may affect the sale price that was agreed upon.

A realtor can also provide an official status certificate for condo buyers.

According to Legal Line:

The status certificate is the one document that will give prospective buyers details of the financial and legal circumstances of both the condominium building and the particular unit they are interested in.

In other words: both a home inspection and status certificate offer peace of mind on your investment.

Preparing Your Finances

Chalkboard with word word "APPROVED" written on it.

One way a realtor can help you land your dream property is to get your mortgage pre-approved (GotCredit).

The Toronto Star reports:

Getting pre-approved for your mortgage gives you an edge over other people who might be interested in the same property as you. The seller will know that you are a serious buyer, and you are able to confidently negotiate the purchase of a home.

Another piece of advice is to have your deposit ready in the form of a certified cheque or bank draft.

As I state in my interview with the Star:

This helps get sellers “excited” about the offer, because if they accept the offer the cheque will be deposited to the brokerage account “and they’ll be able to have a firm deal…”

By doing these two things, foreign investors can gain an edge over local buyers!

Foreign Investors Guide Conclusion

World flags depicting foreign investors from different countries.

Buying property during a pandemic and from another country is a massive challenge (Doug Hay).

But the right real estate agent can make the process far easier and less stressful.

They can find the perfect property for your needs, hire lawyers, get a home inspection and facilitate financing.

Finally, they can negotiate aggressively on your behalf so you can get the best deal possible.

Are you a foreign investor looking for Toronto real estate? Contact me below for details.

 

Wins Lai
Real Estate Broker
Living Realty Inc., Brokerage

m: 416.903.7032 p: 416.975.9889
f: 416.975.0220
a: 7 Hayden Street Toronto, M4Y 2P2
w: www.winslai.com e: [email protected]
*Top Producer (Yonge and Bloor Branch) – 2017, 2018, 2019, 2020

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