Vancouver implemented one last August and recently Toronto did the same: A foreign buyer’s tax of 15% on homes purchased by non-residents. Both cities did it to try to curb their out of control real estate markets and try to get more control over their pricing. It may have other benefits however, as the experts say that this just may pique the curiosity of those out of town buyers and re-route them to Calgary.
We all know that Calgary’s real estate market is slowly coming back to a more balanced state after the economic downturn of a few years ago, and if there is a big tax to come on a purchase in the other two major cities in the country, the thought is that those foreign buyers will see the potential and value for their money in Calgary. If they flock to the city and buy their properties here instead of Toronto or Vancouver, it can only be good for the markets, right?
The answer is yes, at least for the short term, since more foreign investment would only be good for the markets, but the experts are also warning that any changes to the markets in Toronto may be short lived. They saw it happen in Vancouver and are figuring that it will go the same way in Ontario’s largest city too.
When Vancouver implemented their tax, people assumed that all the foreign buyers would just flock to Calgary and gobble up property after property. While it was true that Vancouver’s home prices did go down and price growth stalled for months, the market is now coming back and the experts are predicting this will also happen in Toronto. They say the new tax will only work for around six months, and then once the ‘fear of the unknown’ has passed, the demand that has been pent up for months will all come spilling out at once and the market will be back to where it is now. The thought there is that buyers will wait and watch the fall out before actually signing on the dotted line, which in turn may cool the prices and give everyone breathing room before the markets get ‘back to normal’ once again.
Right now though, Calgary does look like an attractive option for those foreign buyers. They already account for a substantial portion of the demand for luxury homes in Toronto and Vancouver, something that Calgary also has a lot of and if they aren’t hit with an expensive tax and they are getting more value for their money why would they not look here?
While there are no stats on foreign buyers in Calgary’s market, there are in other parts of the country. The Chinese buyers for instance are buying properties in our cities so that their children have a place to call home when they are attending school here. What they do with these properties after their children have graduated, or whether they simply buy them for rental properties in the first place isn’t something that is tracked.
So will those foreign buyers try to avoid the high tax imposed on them in Vancouver and Toronto and look to Calgary to buy their next property? If the experts are giving it six months before everything goes back to normal, we should have our answer in the fall.