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.”