Foreign Investment Tax in the Canadian Real Estate Market

Investors with a lot of money and opportunities to get nationalities beyond their own do not settle for just one house in their hometown. Charles at Church Charles Condo and E2 Condo properties owned by foreigners sometimes turn out to be of no use to the people of Canada, because they just sit their idly with the owners not giving them out for rent. In a developed country where housing issues are indeed very real and overpowering, perhaps Canada’s step was a bold and smart one.

What was the Step?

Canada decided to impose a fixed tax on properties owned by foreign investors, which means that regardless of how well the market is progressing and how your profits are rising, if you fail to pay an annual tax that is quite costly, you will start accumulating tax burden which the state of Canada will be very keen to legally charge on you.

The taxes which were imposed went up to around 15% of market value, and one can expect how decimating it would be for property owners.

How did Investors Respond?

According to reports from the Canadian real estate market, the move of imposing taxes worked with flying colors. The investors started two things; one was selling property, which was not an issue for the state because there were so many buyers back home who did not have taxes imposed. This step was the less popular one.

The other step was that investors started putting out their places on the housing market for rent, which meant that the urban dilemma which revolved around housing an ever increasing number of people could now be resolved without the introduction of very long term supply side policies.

Affordability and Beneficiaries

Was the policy effective in making sure that there were sufficient AND affordable houses available? Absolutely, because the locals realized that the foreign investors had no choice but to rent out their places otherwise they would have to pay from their own pockets annually. This gave the potential clients a lot of choice to choose affordable rent, and the housing problem stood resolved to some extent in major cities.

The state had a new source of revenue, so all in all it was a major step in the making. In addition, local residents heaved a sigh of relief with the availability of more houses. However, the tax has started to act as a disincentive for investors, and the future will bear answer to whether it was a good step in the long run or not.

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