Photo: B Gilliard/Flickr
A stronger Canadian dollar makes foreign homebuyer taxes in Canada more effective, a leading economist suggests.
Coupled with the Metro Vancouver and Greater Golden Horseshoe foreign-homebuyer taxes of 15 per cent, the Loonie’s recent ascent could, if prolonged, discourage overseas real estate investors, says BMO Senior Economist Sal Guatieri.
“A cheaper Canadian dollar would probably encourage foreign investors to thumb their nose at the tax,” Guatieri adds.
Currently at 79 cents USD after a recent runup, the higher Canadian dollar makes transactions more “punitive” for foreign buyers when they already have to pay a levy, Guatieri continues.
However, the BMO economist expects the Canadian dollar to sink below the 78-cent mark in the next six to 10 months, “barring an upswing in oil prices.”
While BMO is also calling for the Bank of Canada to follow up its July increase to the overnight rate this October, Guatieri suggests it won’t have the same impact on foreign investment that a persistently stronger Loonie would.
That’s because non-resident investors typically don’t get mortgages in Canada to finance the purchase of properties, Guatieri notes.
“I presume they’re borrowing the money, if they need it, in their home country,” he explains.
Some have doubted the overall effectiveness of Ontario’s foreign-homebuyer tax because of a number of possible loopholes.
International students, for example, can qualify for a rebate on the tax.
“So, it is highly unlikely the new 15 per cent Non-Resident Speculation Tax will have any material impact on condo sales, given the rebate available,” Shaun Hildebrand, senior VP of Urbanation, a condo-focused data firm, told BuzzBuzzNews after Ontario’s Fair Housing Plan was announced.