With a weakening loonie and an increasing volume of money from overseas being funnelled into Canada’s real estate sector, Benjamin Tal of the CIBC argued that it is high time for a tax on foreign investors.
Tal stated that even though information on the precise role that these investors play remains incomplete, a flipping tax would take care of the “most problematic element of foreign investment in Canadian real estate.”
“We don’t know how big it is, but we know it’s not constructive,” Tal told BNN in an interview.
“Toronto and Vancouver look very attractive,” he added, alluding to the increasing number of luxury properties in these cities being snapped up by foreign buyers for residential and investment purposes.
While exact numbers remain to be seen, foreign money has been tagged by various quarters as a major factor in the staggering growth that has priced out domestic consumers from the country’s housing markets.
Among the most prominent movers in this segment are the Chinese, many of which are taking advantage of a mainland program that would allow those worth at least 1 million yuan to invest up to 50 per cent of their wealth overseas.
“[There is a] clear sense of urgency among many Chinese residents to send money out of the country,” Tal said.
The CIBC deputy chief economist added that the phenomenon of family members already residing in Canada is proving to be a powerful incentive for foreign nationals.
“[The] next few years will see even more foreign money entering Canadian real estate markets,” Tal explained. “[Money] comes from outside the country, but family members – mostly wives, children or students – reside in Canada.”