15% foreign speculators tax - will it help?
Friday Apr 21st, 2017
I am not sure about the current statistics, but last year Bank of Canada warned that real estate may be overvalued by as much as 30 per cent. Exactly one year later, I wonder how much it's overvalued now? No word yet from the Bank of Canada, I am sure they have a difficulty to estimate the market. More than that, I believe that no one could understand what had just happened to Toronto real estate market.
And now this, from all places, Richmond Hill takes the crown. It’s a fact that the town has been very popular among Chinese investors lately. Run down detached house would sell for 1.5 mil and up. Experts tell us that the main reason is supply, builders don’t build enough homes, demand is strong and it leads to bidding wars.
The problem with supply-demand reasoning is that when the house turns into commodity, it never will be enough housing until there is strong demand to invest into flying high asset and investment money pouring freely into the country. In this situation, it’s hard to blame sellers for keeping sales on hold and wanting to have more – because up is the only direction the market can go, right? The only question is how much!
Real estate is basically essential to the Canadian economy
Proposed 15% foreign speculators tax may cool the market. But, let’s not forget that real estate is basically essential to the Canadian economy, with new home construction, realtors, lawyers and other associated industries and the residential housing industry being responsible for as much as 20 percent of GDP. The government fears the change - with manufacturing, mining and oil industry in the state of decline, who would dare to pop the bubble or stop investment. This concentration of wealth and activity in one sector underscores the importance of real estate for Canadian growth, however, elevates the risk.
I can’t imagine that Ontario government is going to tank the market -they don't have the willpower to stop this engine running and buzzing.