Foreign buyers continue to flood Canada's real estate hotbeds, fuelling demand for new projects and pushing up prices for just about everybody.
And while developers, realtors and investors are reaping the benefits, some fear Canada's biggest housing markets could collapse like a house of cards if foreigners were to head for the exits in search of the next best thing.
Average property prices in Canada continue to climb, posting another 5.5% in year-over-year gains in October and causing the Canadian Real Estate Association to up its annual sales forecast.
Prices in Canada today are "overshooting," said CIBC's Benjamin Tal in a new report. He's hoping price growth will come back down to earth, gradually.
In the meantime, Chinese investors are buying condominiums and houses worth more than $2 million at unprecedented rates in two pockets of Vancouver. This group accounts for roughly 20% of the overall sales in the city and is the main the reason prices are so high there.
"If you eliminate this segment, you get a semi-normally functioning market," Tal told QMI Agency.
The same phenomenon, though to a lesser degree and mostly from European buyers, can be seen in Toronto and even Montreal, he said.
"If for some reason we see foreign investors in Vancouver or in Toronto exiting, then that definitely will be an issue."
There are no official statistics on foreign buyers in Canada's property market, but anecdotal evidence of wealthy European, Middle Eastern and Asian investors snapping up property, especially condos, north of the 49th parallel is well documented.
Garnet Watchorn, president of Graywood Developments and the man behind Toronto's new Ritz-Carlton hotel and condo project, said many units were sold to investors in Hong Kong and Singapore because that's where the luxury buyers are.
Some developers go to great lengths marketing their projects overseas, Watchorn said.
But most of the time Canada's solid market and history of strong returns, especially compared to sagging markets south of the border, is enough to lure buyers.
Watchorn and other real estate experts gathered for a panel discussion at the University of Toronto's Rotman School of Business last week.
Any number of things could go wrong and cause the market to take a turn, they warned.
For one, rental rates aren't keeping up with property values. If prices continue to outpace rent, landlords will have a harder time paying the mortgage and many could be forced to sell.
A new tax on foreign buyers could also wreak havoc, said Stephen Moranis, founder of Prudential Sadie Moranis Realty.
He's concerned that the government may consider intervening on foreign deals as affordability continues to erode for average Canadian workers.
Any new tax on non-resident purchases could be disastrous, especially to high-rise builders who sell to investors, Moranis said. So far, no such tax proposals have been tabled.
Even the Wall Street Journal has drawn parallels between Toronto's glass-tower-and-crane-dotted waterfront and Miami, where an invasion of foreign buyers inflated a speculative bubble that burst with disastrous consequences.
Much like Miami in its building heyday, the Greater Toronto Area was home to nearly 1,200 condo projects with more than 200,000 units this past summer, according to research firm Urbanation. Another 16,000 units are expected to hit the market next year.
There's also the debate of what constitutes foreign money, Tal said. Many Chinese buyers in Vancouver are sending their families to live and work in the city.