In an analysis piece for CBC News
, veteran journalist and industry observer Don Pittis argued that the country’s property markets have reached a point where a single major change like slapping a tax on foreign investors could totally upend the industry—a dangerous predicament given that the housing sector has “become the spark plug of the economy.”
“What governments quite rightly must be considering is what would happen if legislation to discourage foreign buyers was just enough to crack confidence and pop what so many people worry may be a property bubble,” Pittis wrote.
“Vancouver prices have hit such staggering levels that even talk of a special tax or restrictions on what properties foreign investors can buy could feasibly send the market into a tailspin,” he added.
Complicating matters is that any attempt to prevent further participation by foreign buyers—a segment that various quarters have blamed for the seemingly out-of-control price growth in Canada’s major cities—might lead to a catch-22 that would hamstring the possibility of more decisive government action.
“Without a continuing influx of foreign investors, new construction would likely slow and deprive the economy of jobs,” Pittis said. “[A] general decline in employment could lead to a vicious cycle of economic weakness”
The analyst maintained that while authorities might be tempted to make drastic interventions to address the situation, a measured and unhurried response—painful as it may be—that would take all angles into account remains the best course to take
“In the bidding war for government attention, legislators must weigh the outrage of those priced out of the market against the fears of those whose livelihoods depend on a continued boom,” Pittis concluded. “The best solution would be to meet in the middle, with rules that would help new buyers without mortgaging their economic future.”
Canada’s federal and provincial governments seem to be keeping a “hands off” policy when it comes to the foreigner-dominated real estate sector, and for good reason.