I thought for this month’s posting, I would make a longer post and direct your action to a heavily contested topic; the Foreign Buyers Tax. If you have been reading the news lately you have most likely heard about it; but do you really understand what it means? I will present both sides of the argument, for and against.

For those that are unaware, the 15% foreign buyers tax is a tax that foreign investors or those that are not residents of Canada pay when they purchase or gain interest in a property. British Columbia was the very first province to initiate this foreign buyer’s tax, however within the last two weeks, in Ontario on April 20^th 2017, the Ontario’s Fair Housing Plan was introduced.

Idea beyond the Tax:
There is a lot of contestation as to why the foreign buyers tax was introduced, however, I believe it really comes down to two main objectives:

Affordable Housing:
The idea behind owning a house; is this a privilege or should it be a right? – That is something to consider, because it is at the heart of the matter.

The first objective is the idea of affordable housing. The BC and Ontario markets for the last few years have been on “fire” and looks like the end is never in sight, by this I mean the ever increasing prices of homes. For example, a million dollars in the BC market, Vancouver particularly, has become the norm to purchase a house, an average couple or individual could potentially find that difficult to come up with or be cleared by a bank to finance with.

The idea behind the tax, is that you can cool the housing market and slow the ever increasing prices of the market by theoretically making the Canadian market less attractive to foreign buyers. The foreign buyer’s arguably are not living in the houses and are treating the real estate market as simply a means of investment and not home ownership.

The argument could be made however to not interfere with the housing market, let the laws of supply and demand of the markets work, an equilibrium price will emerge, and if overheating occurs, the market will correct itself. The markets will react on their own and interference in the markets create factors that are unpredictable.

Rental Rates Control:
Many couples or individuals who cannot afford to buy, rent out apartments, in the hopes that they can potentially own it and or wait until they have enough money for a down payment.

The second objective, particularly in the new Ontario Fair Housing Plan is to close loopholes to the 2% rent increase per year as set out by the provinces Landlord and Tenant Board. In an article I just read, a women in Ontario was shocked to see that the landlord increased her rent by 17% in one year, and since this was well within the rights of the landlord, there was little she could do. The availability of rental properties in Ontario is extremely low, therefore, landlords can take the risk of tenants like her moving out and because they believe they can easily find another tenant, it presents a non-issue.

Foreign investors rent out the condos that they purchase, knowing that they can command significantly high rental prices.

The argument could be made however that the investors are contributing to the Canadian economy quite significantly. Introducing measures such as these creates an isolationist perspective and the Canadian economy could lose billions of dollars’ worth of investment, which could hurt the Canadian economy more than not interfering.

Conclusion:
To conclude, I have presented both sides of the argument fairly, it will up to you to formulate your opinion on whether or not you agree with the decision of the foreign buyer’s tax and the Fair Housing Plan. Do you believe in a free fair market, or do you believe in some interference? It is an extremely tricky question to answer.