Canadian Federal Housing Minister Ahmed Hussen addressed the housing shortage in many of Canada’s provinces by stating that he would like to limit passive foreign investment. Furthermore, Hussen stated that he would support implementing density measures, as New Zealand did, to allow builders to create up to three homes on a single-family lot. “Any measure that increases the housing supply, that intensifies the use of land, that builds more housing and that frees up more housing on the same amount of land, is a good thing,” Hussen added.
Hussen did not provide details on what his foreign buyer ban would entail, but Trudeau did make similar promises after winning his third term in September. The 1% tax on vacant foreign-owned land and housing begins on January 1. The Liberal Party is touting a tax-free down-payment savings program for first-time homebuyers as well as rent-to-own programs. Both measures would cost Canadian taxpayers C$4.2 billion in the next four years.
Canada is also considering placing a ban on house flipping in what they believe is an effort to cool housing prices. The problem comes when they put in punitive laws that become permanent because of a trend based entirely upon currency. Foreign, mainly Chinese, buyers see Canadian real estate as a safe place to park assets. Their profits seem amplified when converting the currency. The measures the Liberal government plan to take could cause capital flows to diminish once investors no longer real estate as a safe haven. Once the government imposes the tax, you can bet it will rise rapidly from 1% because there is a complete misunderstanding of what is driving the real estate markets.
