The smoke has cleared. The dust has settled. The votes have been counted, and Prime Minister Justin Trudeau and the Liberals have formed a minority government. But what does this mean for the Canadian real estate market?
During the federal election campaign, it was clear that housing was one of the most important subjects among all the leaders and candidates. From the Grits to the Tories to the New Democrats, the federal leaders understood that housing was a critical concern for many Canadian voters. As a result, they all brought potential solutions to the issue of unaffordability across the Great White North. The proposals included a ban on blind bidding, investments in more supply, and tax incentives for developers.
But one solution seemed to generate the most support across party lines: reining in foreign buying.
Canadian Real Estate News: Foreign Buyer Ban a Certainty Based on Election Promises
The Liberals and the Conservatives both supported a ban on non-resident buyers. The NDP recommended introducing a 20-per-cent foreign buyer tax, similar to the 15-per-cent levy in British Columbia and Ontario. Now that the Liberals have been re-elected, there is a renewed focus on what Trudeau plans to do on the housing front.
On the campaign trail, Trudeau vowed a two-year restriction on foreign homebuyers to tackle housing affordability. The prime minister also wants to expand a tax on foreign-owned vacant housing.
“You shouldn’t lose a bidding war on your home to speculators. It’s time for things to change. No more foreign wealth being parked in homes that people should be living in,” the Liberal leader told a crowd of supporters in Hamilton, Ontario. “It’s not okay that the communities you grew up in aren’t in places where you can build a life, raise a family or grow old. It’s because the deck is stacked against you.”
Whether Trudeau and the Liberals can move ahead with this campaign promise in the next legislative session remains to be seen. But many Canadians agree: something needs to be done to re-balance the national real estate market.
How Big is Canada’s Foreign Market?
Are foreign buyers controlling a significant percentage of the Canadian real estate market? According to a 2017 study by Statistics Canada, which is the most recent measurement, non-residents owned 3.4 per cent of all homes in Toronto and 4.8 per cent of residential properties in Vancouver. But while these figures may seem negligible, they may actually be significant, when you consider how tight supply is in the current environment.
Some experts warn that there could be some backlash on a ban of foreign homebuyers. Many Americans purchase and own property in Canada, and restrictions could result in the United States retaliating with financial penalties.
“You can just imagine all the snowbirds who have places in Florida, Arizona, Las Vegas, and all of a sudden, they have to start paying an extra tax? If the Biden Administration or the governor of Florida says, ‘Well, the Canadians are going to do that to our people who own fishing lodges in New Brunswick? Okay, we’ll put a one per cent tax on any Canadian that owns a home in Orlando,” Mike Moffatt, senior director of policy and innovation at the Smart Prosperity Institute, recently said in an interview with BNN Bloomberg. “Globally, we are often the foreign buyers and I don’t think Canadians would be too happy if we were given a taste of our own medicine.”
A National Housing Strategy is Needed
A recent RE/MAX Canada survey found that close to half (43 per cent) of Canadians believe a national housing strategy could one of the best mechanisms to solve the country’s affordability crisis. A different RE/MAX Canada report discovered that 42 per cent concede that the high cost of housing was preventing them from entering the housing market, and 48 per cent were concerned about their ability to afford a home over the next two years.
Meanwhile, a separate Angus Reid poll, conducted this past spring, found that roughly 60 per cent of millennial Canadians felt “miserable” about their housing situation. An RBC study completed earlier this year learned that more than one-third of adults between 18 and 40 say they will never be able to save enough to buy a home, plus 62 per cent think they will be priced out of the housing market over the next ten years.
Benjamin Reitzes, rates and macro strategist at BMO Capital Markets, told Bloomberg that “there is no short-term solution,” adding that “It’s a long-term issue. They aren’t going to fix it in one year or with one policy.”
Whether or not a potential national housing strategy touches upon foreign buyers, it’s clear that a multifaceted approach is required to help boost supply to ease the exceptionally tight markets from coast to coast.