“I think it’s something to consider because real estate is meant to serve local (populations), serve people who live in Canada,” says David Oey, an agent in Toronto, adding that an increase in foreign ownership could create a speculative market.
The government in Australia has imposed an application fee for non-Australians looking to purchase property. Those fees start at AUD $5,000 for properties up to AUD $1 million in price, and get even steeper for higher-end properties.
Buyers who flout those rules, however, could face fines up to AUD $127,500 or up to three years in jail.
According to the New York Times, Tony Abbott, the Australian prime minister, told reporters in Sydney the new law is an effort to keep real estate affordable for nationals.
“We want to ensure that illegal foreign investment is not unnecessarily driving up prices,” he said. “We want to maximize the opportunities for Australians to buy a home at the best possible price.”
However, Oey says those taxes need to be even higher for high-net-worth buyers.
“(Those fees) wouldn’t deter (foreign ownership) because it’s an insignificant amount,” he says, referring to the possibility of this fee structure in Canada. “It would have to be a higher amount to make this type of policy actually effective.”
But unlike Australia, where a glut of foreign buyers has pushed home prices up more than 30 per cent in just three years in cities such as Sydney, Canadian investment remains relatively low – just 2.3 per cent in Vancouver and 2.4 per cent in Toronto, according to the Canada Mortgage and Housing Corp.
Still, Oey says Canada needs to keep abreast of these trends and nip any potential risk in the bud. That's especially true given the phenomenal year-over-year price growth Vancouver realized in April.
“It was the same question for mortgage rates five or six years ago,” he says. “Canada, being a leader in maintaining sound fiscal and financial policies, and we should continue that and consider these types of foreign ownership policies that could be beneficial for us.”
Agents concerned with the levels of foreign ownership in Canada are pointing to a model used in Australia to keep the market from overheating.