OTTAWA (Reuters) – Canada is readying a new tax on foreign home buyers to help tamp down on speculative purchases from overseas, cited as a factor behind sharp rises in housing prices in some markets that have left many Canadians unable to afford homes.
The new tax was mentioned in a fiscal document published on Monday, though few details were given. The timing and scope of the measures would likely be outlined in the spring budget, expected in March or April, a senior government source said.
“Speculative demand from foreign, non-resident investors contributes to unaffordable housing prices for many Canadians,” the government said in its Fall Economic Statement.
“The government is committed to ensuring that foreign, non-resident owners, who simply use Canada as a place to passively store their wealth in housing, pay their fair share.”
Foreign speculators were blamed for driving up home prices in Vancouver and Toronto earlier this decade, prompting British Columbia and Ontario to impose land-transfer taxes on foreign buyers in some markets.
British Columbia has a 20% land-transfer tax for foreign buyers in some regions, along with an additional speculation levy on empty homes, while Ontario’s 15% tax applies to foreign buyers investing in certain cities.
Those measures helped slow speculation and led to some price corrections, though current levels of foreign demand are unclear due to a lack of national statistics on overseas ownership.
Canada home prices have risen 88.3% in the last decade, and were up 10.9% in October compared with the previous year, according to data from the Canadian Real Estate Association.
Recent housing gains have been driven by detached properties in smaller centers, as Canadians flee densely-packed city centers for homes with backyards and home offices amid the COVID-19 pandemic.
The Canadian government is also expanding the first-time home buyers incentive, aimed at helping millennial and immigrants gain a foothold in the housing market.
Reporting by Julie Gordon in Ottawa, additional reporting by Steve Scherer; Editing by Tom Brown