B.C. foreign buyer tax could have unintended consequences
Some housing experts are worried that B.C.’s new tax on foreign buyers of Metro Vancouver housing could blowback on other Canadian housing markets such as Victoria or Toronto.
B.C.’s new 15% tax on residential purchases made by foreign nationals goes into effect today. The announcement has caused some housing professionals to express concerns that the buyers turned off by the 15% premium in Vancouver will be forced to buy in other markets which may already face problems with overvaluation and supply constraints.
According to CBC, Toronto realtor Derek Ladouceur believes those foreign buyers will head straight to Toronto to get better deals.
While on the surface, foreign investment probably doesn’t sound so bad, after all foreign investment in Canada is key to a healthy economy. But it can also cause the housing market to become overheated.
While Toronto has struggled with an overheated market for some time, now definitely isn’t the time to feed the fire. Toronto’s Mayor John Tory has stated that the city would gladly implement a similar tax or any viable plan to ease the rapid price growth of the city’s housing. With many Torontonians already struggling to afford homes, anything that puts prices at risk of getting higher is bad news for Toronto.
It will likely take a long time before we can come up with solid conclusions on how the new tax affects other markets, but as a recent CMHC report highlighted, the Canadian housing market is already in danger of becoming overheated. That means it’s more important than ever for policymakers to identify and assess problems, then implement strategies for fixing them quickly.