So far, the fact cannabis is now legal Canada-wide has had little, if any impact, on Toronto and Vancouver’s residential real estate, but if it reduces crime rates, which is a possibility, it may eventually boost demand and value in certain neighbourhoods.
“People naturally want to live in neighbourhoods with low crime rates, so if there is any impact, the effect on Toronto’s residential real estate will be at best nominal and most likely positive,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada, Mississauga, Ont. Alexander. “However, I have no doubt proximity to good schools, convenient shopping, transportation, arts and recreation will continue to have the greatest impact on supply and demand, and subsequently prices.”
As a result of the new Cannabis Act, which took effect on October 17, 2018, adult Canadians can legally smoke/vape, share, grow and sell the herb, with specific provincial and territorial restrictions and conditions. In June 2018, Prime Minister Justin Trudeau tweeted: “It’s been too easy for our kids to get marijuana – and for criminals to reap the profits.” He has also said legalization helps protect communities from organized criminal involvement in the marijuana trade.
When, and if, legal access to the herb eliminates the black market and reduces associated crime, neighborhoods could become more appealing. Notably, the study Crime and the Legalization of Recreational Marijuana, published in the Journal of Economic Behavior & Organization, found the staggered legalization of recreational marijuana in the adjacent states of Washington (end of 2012) and Oregon (end of 2014) reduced rapes and property crimes on the Washington side of the border relative to the pre-legalization years and relative to Oregon. While it also increased marijuana consumption, it also reduced the consumption of other drugs and alcohol.
Online purchases are quick and easy for anyone aged 19 and up in B.C. and Ontario, but if they want expert advice and a more tangible experience, there are still relatively few legal pot shops in either city. Vancouver currently has three and Toronto’s first licensed cannabis retailer is set to open on trendy Queen St. West in April.
“People still want to buy homes in Vancouver, so bottom line, legal cannabis will have zero impact,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada, office is based in Kelowna, B.C. “Buyers from mainland China, who drive a significant amount of Vancouver’s residential transactions, don’t like the cannabis legalization at all, but it won’t keep them from investing in Canada.”
Practically speaking, the B-20 stress test introduced by the Office of the Superintendent of Financial Institutions, Canada’s main financial regulator, will affect prospective buyers far more than where cannabis is bought and sold, smoked or vaped.Since January 2018, even borrowers who have a down payment of 20% or more must pass the stress test to prove they can handle interest rates that are substantially higher than their contract rate.
“The B-20 stress test is affecting the residential real estate market far more than the Cannabis Act ever could,” says Ash.
Likewise, the foreign buyers’ tax that’s applicable in certain B.C. regions and in Ontario’s Greater Golden Horseshoe Area is a consideration for investors with an interest in Vancouver and Greater Toronto Area’s residential real estate markets. In the Greater Golden Horseshoe Area, the 15% Non-Resident Speculation Tax applies to the purchase or acquisition of an interest in a residential property, while in B.C., a hefty 20% additional property transfer tax is levied.
To date, it’s clear the tangible, measurable and unavoidable costs, such as the foreign buyer and other taxes, associated with residential real estate purchases will affect buyers’ decisions far more than the still very new Cannabis Act.