Investors: Tax foreign real estate buyers

While Australia and Hong Kong are clamping down on foreign real estate investment, Canada is missing an opportunity to charge an extra tax to foreign investors, charge some real estate experts.

“I would love to see a tax brought in here to slow foreign investors down or at least to make them contribute more to the economy,” says Omer Quenneville, a broker at Real Estate Homeward, who divides his time between the Toronto and Hong Kong markets.

“In Hong Kong, you have to pay 15 per cent if you don’t have a permanent residency card. It’s called stamp duty, but it’s basically the same as the land transfer tax. It’s quite a deterrent.”

Last month, the Australian government announced it would also charge higher fees to foreign buyers who purchased residential real estate, and would fine those who violated its foreign investment rules as much as 25 per cent of the value of the property.

But Canada has yet to implement any such system, despite rising concerns about foreign investors, particularly in booming markets like Toronto and Vancouver.

In December 2014, CMHC produced numbers on foreign investment in Canada, which unsurprisingly showed that Toronto and Vancouver account for the largest percentages, at 2.4 per cent and 2.3 per cent, respectively.

At the time, CMHC president Evan Siddall said “we don’t think the level of foreign ownership in Canadian housing markets is excessive.”

But, said Quenneville, foreign investors are definitely driving up the prices for local buyers. “Absolutely, it’s true,” he added. “A lot of the units that are being bought are just sitting empty.

"These people have got their money invested here, but they’re not actually invested in the country, they’re invested in themselves. There is little to no benefit from that.”

The influx of foreign investors also acts as a deterrent for local investors and homebuyers. “There’s nothing wrong with a Canadian who wants to invest in real estate and buy an extra property and supply some inventory for the rental market,” continued Quenneville.

“But when foreign buyers come in, they buy the property, it goes up in value and there’s no benefit, except for the fact that they’ve left a mess behind of people who can’t afford to buy.”

 

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COMMENTS

  • by MFenn 2015-03-17 1:05:58 PM

    I'm suspicious of such anti-foreigner measures, as if investment money behaves differently if the person is here for just over 6 months per year or just under 6 months per year, or whatever; or whether going before a citizenship judge somehow supposedly makes the investment money act differently. It sounds like just another cynical attempt to put up taxes, using a 'moralizing' cover. I'm a Canadian citizen and I recognize that immigration and prospective immigrants have been greatly beneficial to the economy.

  • by Bill Cargill 2015-05-09 6:19:11 PM

    Well I'm from New Zealand and we see alot of Chinese buyers here boosting up our house prices. Our average house price in Auckland now matches Vancouvers(2014) at NZ$804,000. This is of course, crazy!

    The real reason they allow foreigners to buy properties is to bring money into the country so saving government borrowing to stimulate
    the economy. Trouble is that foreign money was mostly borrowed and what happens when everyone wants to sell when the housing market hits its next downturn. The over leveraged properties will swamp the market. No worry about rising house prices then it will be just the opposite.

    Canada is such a wealthy country, second only to Saudi Arabia for oil (albeit oil sands) and also a world major in uranium mining as well as
    no shortage of water (or ice, or snow!) With only a mere 35 million population it should and could be achieving better economically than what we currently are seeing with its over 2 plus billion trade deficit ( While pip squeak NZ has an over 600million trade surplus!)

    I love Canada and wish to invest there myself.

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