Source: Hot Air
We hear it every presidential election cycle. As the possibility that a Republican might win the White House dawns on some folks in Hollywood several will announce plans to leave the country if this or that politician wins. Whether you see those kinds of statements as a threat or a promise, it rarely seems to happen. Most celebrities know where their bread is buttered and leaving the US would put a big damper on their careers. But thanks to a recent decision in Canada, even the threat to move there may be a lot less plausible now. In response to a hot housing market, Canada just put an end to purchases by foreign buyers.
As of 1 January, the ban prohibits people who are not Canadian citizens or permanent residents from buying residential properties, and imposes a C$10,000 fine on those who breach it.
In late December – 11 days before the ban came into effect – the Canadian government announced some exemptions to the regulation, including for international students who have been in the country for at least five years, refugee claimants and people with temporary work permits.
In a statement, federal housing minister Ahmed Hussen said the ban is meant to discourage buyers from looking at homes as commodities instead of a place to live and grow a family.
“Through this legislation, we’re taking action to ensure that housing is owned by Canadians, for the benefit of everyone who lives in this country,” Mr Hussen said.
The motive here isn’t to keep Hollywood lefties out of Canada, it’s to prevent foreign real estate speculation which some politicians believe is responsible for high prices. But not surprisingly the Canadian Real Estate Association isn’t a fan.
“The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said the campaign website of Prime Minister Justin Trudeau’s party this past year. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.”…
But the steep rise in home prices in 2020 and 2021 was already reversed in 2022, well before the law took effect. Average home prices in Canada peaked just above $800,000 Canadian in February and have fallen steadily since then, dropping about 13% from that peak, according to the Canadian Real Estate Association…
CREA also expressed concern that the ban could prompt retaliation by the United States and Mexico to prohibit purchases in those countries by Canadians, especially retirees looking for winter homes away from the Canadian winter…
“These provide Canadians with a place to spend the winter months and are a form of savings for Canadian retirees,” said the group. “If Canada places a ban on Americans owning property in Canada, we should expect them to respond in kind.”
That’s not likely to happen because we’re not Canada. But Reason pours some cold water on the idea that foreign buyers are the real source of the problems with Canada’s housing market.
It’s certainly true Canada has some of the most unaffordable housing prices in the developed world. Average home prices are ten times average incomes. Compare that to the U.S., where median home prices are 4.3 times median incomes, per National Association of Realtors’ data. OECD figures show that Canadian home prices have grown 43 percent faster than incomes since 2015…
The evidence suggests the effects of the new policy will be limited.
For starters, foreign buyers make up only 5 percent of homeowners in the country. Squeezing out such a marginal part of the market probably won’t have a huge effect on prices…
A heavy tax on foreign home purchases in British Columbia has managed to reduce “foreign-related” purchases from 10 percent of all sales to between 1 to 2 percent. One study of the policy showed it reduced home price growth by 1 percent, and that minimal benefit faded after a few months.
So this probably isn’t going to make much much of a difference. It’s just one of those things that politicians latch on to because blaming the US is always popular.