In a move aimed at addressing the escalating housing crisis in Canada, the federal government recently extended the ban on foreign homebuyers for an additional two years. The ban, originally implemented in 2022, was set to expire on January 1, 2025, but will now remain in effect until January 1, 2027. Despite the government's intentions to curb soaring housing costs, experts argue that the extension may not be the most effective solution.
Finance Minister Chrystia Freeland defended the decision, stating that the extension would ensure that houses are used as homes for Canadian families rather than becoming speculative financial assets. However, the move has been met with criticism, with some labeling it as a "xenophobic" measure that unfairly targets foreign buyers.
Derek Holt, Vice-President and Head of Capital Markets Economics at Scotiabank, expressed his disapproval, describing the extension as a politically motivated scapegoating of foreign buyers who constitute a minimal share of home purchases. Holt argued that the root of the housing crisis lies in the mismanagement of Canadian housing and immigration policies.
Thomas Davidoff, Director of the University of British Columbia's Centre for Urban Economics and Real Estate, questioned the impact of targeting foreign buyers on the housing market. He emphasized that the crucial factor should be the use of the property, not the nationality of the owner. Davidoff proposed a more effective policy, focusing on vacant homes, regardless of ownership, and targeting property owners in Canada who do not pay income tax.
Davidoff highlighted the issue of people owning expensive homes in Canada while paying minimal income tax due to the country's low property tax and high income and sales tax. He suggested that implementing a one percent tax on property value, with each dollar serving as an income tax credit, could generate approximately $2 billion in taxes for Toronto and Vancouver. This approach, he argued, could both generate revenue and free up housing for the local workforce.
Karen Yolevski, COO of Royal LePage Real Estate Services, pointed out that housing prices in Canada have continued to climb since the initial implementation of the foreign homebuyers ban. She argued that non-Canadian property ownership constitutes a small percentage of the overall housing market, indicating that a ban on such ownership may not significantly improve access to housing. Yolevski suggested that the most effective way to address the housing crisis is to focus on substantially increasing housing supply.
According to the Canadian Real Estate Association, the average price of a home in Canada reached $657,145 in December 2023. As the debate over the effectiveness and fairness of the extended foreign homebuyers ban continues, experts stress the importance of comprehensive and targeted policies to address the root causes of the housing crisis and ensure sustainable solutions for all Canadians.
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