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International Property
Business

Canada wants to tax phantom foreign homebuyers to rein in red-hot property prices

  • Home transactions from January to October rose 8.6 per cent from a year earlier and could break 2016’s record, according to association
  • Average home price rose to a record C$607,250 in October, surprising industry analysts at a time when traditional market drivers are still weak

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Vancouver is one of the two most active and expensive property markets in Canada. Photo: Handout
Cheryl Arcibal
Canada’s plan to cool a red-hot domestic property market by taxing foreign homebuyers who do not reside in the country could upset the industry recovery and further erode international demand, analysts said.
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The proposal has gained traction in Prime Minister Justin Trudeau’s government as property agents recorded roaring business and surging prices this year despite the Covid-19 pandemic, suggesting improving sentiment among investors on the market outlook.

Some 461,818 homes have changed hands this year through October, an 8.6 per cent increase from a year earlier, according to the Canadian Real Estate Association (CREA). It was the second-highest January-October volume on record, trailing only 2016, it added.

Prices rose 10.9 per cent in October from a year earlier, the most since July 2017, the association said in a November 16 market update. The unadjusted national average home price rose by 15.2 per cent to a record C$607,250 (US$474,508), influenced by sales in Greater Vancouver and Greater Toronto Area, two of Canada’s most active and expensive markets.

Fifteen years of steady growth in Canadian home prices
Fifteen years of steady growth in Canadian home prices
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“Some cities remain wildly unaffordable while others are experiencing a bust,” said Natalka Falcomer, executive vice-president for corporate development at Ontario-based Chestnut Park Real Estate, an affiliate of Christie’s International Real Estate. While a foreign-buyer tax could hurt demand, it “does not necessarily mean a curbing in home prices”, she said.

While Canada does not issue official numbers of foreign holders, some industry estimates put them at 5 to 10 per cent of total transactions. Mainland Chinese, including Huawei Technologies chief financial officer Meng Wanzhou, are among the biggest property investors.

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