The real-estate markets have been swept by news that the province of Ontario is instituting a 15-percent tax on foreign real-estate investors. This follows on the heels of a similar 15-percent tax slapped on foreign real-estate investment in British Columbia.
But what does this mean for the country’s real-estate markets and related investment opportunities? As usual, things aren’t as simple as they seem.
Political considerations
On the surface, both Ontario and British Columbia seem to be pouring some cold water on otherwise hot real-estate markets that are being fuelled by foreign speculation. But there’s more here than meets the eye.
As with so much in our society, some of this is about politics: the politics of targeting foreigners when perceived problems arise, as well as the politics of implementing taxes and price controls, despite their historical ineffectiveness.
As an example, the tax on foreign investment in British Columbia was instituted almost a year ago. In that time, housing prices have definitely cooled down in the province. However, we’re already seeing signs of a bounce back, and many market experts are predicting a continuing upward trend, as well as a return to trends in existence before the tax was implemented.
Underlying investment opportunities
In other words, the markets can often ignore politics when it comes to investing. There are deep structural strengths to the real-estate markets in Vancouver, Toronto, and elsewhere, and measures meant to address political fears and anxieties often don’t address market realities.
What does this mean for investors? Well, it means that you should keep focused on the underlying trends that keep driving real-estate investment upwards, instead of the short-term measures coming from the world of politics.
