September 25, 2022

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Canada sees foreigners being sacrificed for its home bubble | Business

The housing market is heating up Canada. This headache for a large section of Canadians was echoed in the federal budget presented to the House of Commons on April 7th. Government of Justin Trudeau The next two years will include various measures such as banning foreigners from buying a home.

The average price of a house in Canada in February was $ 816,720 (approximately 8 598,000), according to the Canadian Real Estate Association. According to the organization, which brings together about 130,000 agents, this number is 20.6% higher than in the same month in 2021. The national average price drops to about $ 178,000 when Vancouver and Toronto are the two most active real estate markets. The price in the country is high

Between December 2019 and February 2022 the average price in Canada increased by 44%. Jean-Philippe Meloch, a professor at the School of Urban Planning at the University of Montreal, points out that this increase was felt even before the Govt-19, but the epidemic contributed in a pronounced way. “A lot of Canadians did the renovation. At the same time, the construction industry needed workers and materials that were not readily available. A few outside the big urban centers do not buy other real estate. This made the problem worse, ”he explains.

The Liberal government’s budget includes about 4,000 million Canadian dollars (2,920 million euros) to build at least 100,000 homes over five years. They also raise taxes for the so-called Flip: Sale of old property less than one year old for profit.

Finance Minister Christiaan Freeland said at the budget presentation: “Our economy is built by people, and those people need housing. Here’s the problem: There are not enough homes in Canada. We need more, and they need it quickly. The document also bans foreigners – or foreign companies – from buying property for the next 24 months. Exemptions are available for permanent residents, refugees and holders of work or study permits.

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In August 2018, New Zealand A. Launched Like the arrangement. Also, foreigners cannot buy real estate in the Aland Islands of Finland. The debate over the presence of foreign buyers in the Canadian real estate market is not new: the provinces of British Columbia and Ontario already have a 20% tax rate on these acquisitions. However, the federal government has proposed to ban foreign purchases nationally.

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Different voices speak about the effectiveness of this move. Within the framework of the set of initiatives needed to reduce the housing problem, some point out that this is a step in the right direction. Nicola St., agent of Bosley Real Estate. John told CTV News that non-residents often offer higher deals, thus distorting prices for domestic buyers.

The project you do not like

But the government’s plan has drawn growing criticism. One feature is that the criteria for exclusion are not precisely defined, which can lead to “disguise” activities. Although the biggest argument for opposing this project is related to its actual impact. Meloche says, “Foreign buyers are far less likely to think it will have a significant impact. It seems to me to be more of a political initiative than a practical one.

Tsur Somerville, a professor at the Sadr School of Business at the University of British Columbia and an expert in real estate economics, says over the phone: At the same time, prices have risen. The ban is not going to change the game. ” A report released by the Baker Intelligence Group shows that 1% of properties sold in 2020 were not purchased by Canadian residents. One year after the ban was imposed by the New Zealanders, the average price has increased by 12%; In 2020 and 2021, the increases will be 18% and 23% respectively.

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Canadian lawmakers will vote on the budget in the near future. The Liberals’ election promise is to ban foreigners from buying real estate Justin Trudeau In the September election. The Conservative Party put forward a similar plan in the campaign. The New Democrats (the group that formed the Trudeau political alliance) chose to propose a 20% national tax, as already used by Ontario and British Columbia in its rallies.

“Taxes have had an impact, albeit in a small and short-term way. In addition, foreigners are mainly buying in specific areas and not looking for any kind of property,” says Jean-Philippe Meloch. Tsur Somerville agrees: “We have already seen these lines in cities like Vancouver and Toronto. These lines have little effect. The real estate problem is, so far, a matter of national factors, but it’s easy to point the finger at someone other than us. “

Somerville conducted a study with Andre Pavlo, a professor of finance at Simon Fraser University. The document shows that after British Columbia enacted this tax, only 3% to 5% of Vancouver prices fell in areas preferred by non-citizens. According to the Re / Max Canada Agency, the number of overseas buyers in the north and west of the city was zero in the first five months of 2021, but 60 homes sold for at least five million Canadian dollars.

Steve Laughlur, a researcher at the Fraser Institute, a public policy think tank, wrote in a note that the Liberal government should instead bet on the so-called “bad guys” by betting more on construction and lowering barriers to it. . The National Housing Council recommended investing in the sector for at least $ 6.3 billion instead of the $ 4 billion budget. Similarly, for the Canadian Housing and Renovation Association, the agency regrets that the Trudeau government has recognized the magnitude of the real estate problem in the country, but that there are “certain concrete measures” for sectors with limited purchasing power in the budget.

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