Economist warns of bubble, but not everywhere

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The chief economist of the Bank of Montreal is showing more caution in the property market, but mainly in two areas.

Douglas Porter, who has been positive about the strong market, published a research note yesterday with concern about Toronto in particular but also Vancouver. Porter says that elsewhere in Canada there is an easing of prices or at least an understandable rise due to higher demand from population growth.

The three main factors in the over-valued market are ultra-low interest rates, a boom in the numbers of 20-38 year old first-time buyers, and foreign investors. It is the foreign investment that Porter believes Ottawa should tackle by introducing a tax on non-resident real estate purchases.

While sounding a cautious note, he still says that he does not predict a market crash.
  • Margaret Shinners on 2014-07-24 1:21:21 PM

    I think putting a non-resident tax is an awesome idea. It is one way that it will help Canada pay for its ailing medical system.

  • Daniel McKay on 2014-07-24 2:30:21 PM

    Imposing a non-resident tax would most likely chase away too much foreign investment, particularly from Asia. I doubt we will see such a tax imposed as increasing trade and improving relations with Asia, and China in particular seem to be pretty high on the government's agenda.

  • Ritha Khemani on 2014-07-25 12:36:44 AM

    The nonresident tax seems like an awesome suggestion, and will spare the whole economy a lot of pain if and when the bubble bursts. Taxation of property transactions has worked very well in Belgium and needs to be studied and considered for Canada.

  • Ron Butler on 2014-07-25 1:34:05 PM

    Although Mr. Porter is an eminent economist I think he also know the chance there will ever be a non-resident tax is zero.

    Federal governments have no interest in preventing capital from flowing into this country.

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