Toronto Through the Foreign Lens

Published on 14th November 2017

Throughout my years in real estate, I’ve come across many interesting stories and unique perspectives on how people view Toronto as a city. Interesting enough, we’re always in a bubble until we have to go outside of that smaller bubble into a larger bubble. A simple example of this would be the transition from elementary school to high school to university, and then finally to the workforce. The same concept can be applied to real estate. Until you look at things from a macro perspective, we tend to always live in a bubble (no pun intended). Until we evaluate Toronto from a global perspective, it’s very hard for many of us to appreciate just how great our city actually is.

When I get a chance to speak with other immigrants about Toronto, they often have a very different perspective than those who are born and raised here. Many of us who have been raised in Toronto often don’t have significant sticker shock, that is, until we move or want to buy a property. When this happens, we often get angry at the fact that prices keep sky rocketing and are not affordable to us, the locals, anymore. Even some times blaming the “foreigners”. I hate to say this because I was raised here as well but we’re either on this fast-moving real estate train or we’re off of it. You either have a property or you will struggle to own one as prices pick up.

Please don’t take my cynicism as me trying to sell you some form of real estate. Let me explain my rare pessimism by illustrating 3 stories that will give you a perspective on how “foreigners” view Toronto. (Note for privacy reasons, I’ll be using fake names).

Family 1:
Charlie is from Shanghai and came here as an international student to study at the University of Toronto (which means 2 times the cost of regular tuition PLUS living cost). He got hired at a large firm and got his permanent residence. Prior to getting his status in Toronto, he already bought a place in Toronto with the help of his parents from Shanghai. Charlie was technically a “foreign investor” but is no longer one. His family initially wanted to move to a western country for lifestyle, political, financial and safety reasons. They worked really hard to make their goals happen. Now his entire family has the ability to live in Toronto. That is why Charlie immigrated to Toronto.

Family 2:
Lily and her family immigrated to Toronto for two reasons: her two kids. They had a great business and life in Hong Kong, but her two kids would not be able to have a balanced lifestyle. The life of a child in Hong Kong looks something like this if they have aspirations to go to University:

– 8am – 3pm: School
– 3pm – 7pm: Tutor
– 7pm – 10pm: Additional studying

That kind of schedule until university doesn’t even guarantee you a spot into university. If her kids maintain even 30% of that work ethic in Toronto, how difficult do you think it will be for them to get into university and have a “good life”? That is why Lily immigrated to Toronto.

Family 3:
Bob, unlike the other two families above, was born in Toronto. His parents immigrated here in the late 80’s. Similar to most Asian families, the first thing his parents did was buy a property when they landed in Toronto. They’re now sitting on a ton of equity and appreciation with their family home in Richmond Hill. Bob, even with a high paying accounting job, can’t save fast enough for a down payment to buy a home for himself. So, the parents pulled equity out of their Richmond Hill home to help their son; carrying a mortgage is no problem with Bob’s income, but saving for the down payment was the challenge. Now, the entire family has a comfortable western lifestyle. That is why Bob’s parents immigrated to Toronto.

In all 3 stories, someone in the family at some point was a foreigner. Toronto is a multicultural city and it is harder to find someone who is third generation+ in Toronto than a first or second generation immigrant. They all left their home countries with aspirations to have a better life in Toronto. I’ll also note, even if the foreign-buyers tax was in place for all three stories, none of the three families would have had to pay the tax. When families are evaluating places they want to immigrant to there are many reasons why they picked Toronto to be their new home.

When we read articles that measure a city’s “livability” based on various metrics, Toronto is never number 1 is any of them but is always in the Top 5 for all of them. When you see the cities that are number 1 (London, New York, Paris, Tokyo and Sydney), you’ll notice that the real estate prices in those cities are significantly higher than Toronto. If there is a huge price gap between the top cities and Toronto but only a minor gap between the quality of life, then doesn’t it make sense for immigrants to move to Toronto instead of the other top cities?

The other common theme in all 3 stories is the inter-generational wealth transfer. With all of the political moves that push people into being renters for life (more on that another week), the easiest way to home ownership is through the assistance from the previous generation. If your parents own a property from 20+ years ago anywhere in the Golden Horseshoe, it has likely doubled in price. It is the appreciation that is allowing the next generation to buy properties at the current market prices. If real estate prices double in the next 20 years, where does the money come from to buy a home at the next generation’s market rate? If you answered this generation’s property owners, you are correct. Our current generation will be transferring that wealth to our kids, that is, if we own the real estate right now.

So the question I always pose is, with so many reasons why 100,000 people choose to immigrate to Toronto each year, bringing inter-generational wealth along with them, do you want to get in on the real estate train or stay on the sidelines and potentially be stuck there forever?

Until next time,
Happy Real estate-ing,
Zhen

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