Trudeau’s plan to halt foreign buying of Canadian homes may backfire as cash-ready overseas investors game the market
- Housing prices in Canada have defied declining transactions, as housing shortage in major cities failed to match rising demand
- Prices rose between 10 per cent and more than 30 per cent in various regions from a year ago, as the number of listings shrank by about 9 per cent
Justin Trudeau’s re-election pledge to stop foreign property speculators from pushing up Canada’s home prices will only be temporary, and will have limited impact in improving affordability, analysts said.
The measure, part of Trudeau’s campaign platform for a third term as prime minister in Canada’s federal election scheduled for September 20, is likely to spur overseas buyers with ready cash to jump ahead of the ban, while local Canadians are also likely to sit on the sidelines instead of rushing into the market, analysts said.
“Such proposals can only create more panic buying among overseas buyers,” said Dave Loo, founder and chief executive of the Singapore property portal WhyBorder.com, which lists Canadian property for sale. “Prospective buyers are [likely] to enter the market to beat the new system.”
The scepticism explains why housing prices in Canada have defied declining sales, as housing shortage in major cities failed to match rising demand. Prices rose between 10 per cent and more than 30 per cent in various regions from a year ago, as the number of listings shrank by about 9 per cent in July from June, according to data provided by the Canadian Real Estate Association (CREA).
Various regions in Canada are already taxing purchases by foreign buyers, although the measures fail to rein prices in. Vancouver raised its property tax to 20 per cent in February 2019 from the 15 per cent set in August 2016, while Toronto slapped a 15 per cent levy on foreign purchases in April 2017. Still, Canada’s average home price rose 26 per cent to C$679,000 (US$534,759) in July from a year ago.
