The foreign buyer tax introduced in Vancouver last year by the British Columbia government to address the high home prices was quite conducive for the province but having such a tax implemented in Toronto will be a completely different story warns one of Toronto’s leading developers. However the warning was quickly put aside by leading economists in Canada describing the warning as “preposterous”. Brad Lamb, in an email argued about the ongoing debate on whether a tax on foreign buyers should be implemented in Toronto saying the tax will be a notably bad policy action. He went on to note that having such a tax in the city might lead to a decline in the economy. He also took into consideration the rapid evolve of home prices in Toronto which have increased more than 30% in the past year saying it is indeed a fast growth rate. But he says that the high prices will cool down on its own in a matter of year or two.
A Toronto investor tax according to Lamb is not the ideal solution which will have significant repercussions. In response to the warnings of Lamb, BMO Capital Markets chief economists Doug Porter describes it as absurd stating he has been part of the Canadian economy for more than 30 years. David Madani of Capital Economics also added that Toronto real estate markets contribute a mere 1% of the country’s GDP. Hence a slight change in the real estate market will have very little effect on the entire economy. Furthermore, it will take more than a slight change in the national housing market to have a massive impact on the market which evidently there are no signs of such happening from Toronto.
Porter also expressed his amusement over the claims of experts that the foreign capital has an influence on the national economy and how it could lead to a recession. And according to Lamb if this was true, how did Canada manage to get into such a situation? Porter asked. This is partly as a result of lack of data on foreign investors. In last year’s federal budget, Ottawa set aside funds to improve on data on foreign buyers activity in Canada which led John Stephenson to describe the situation as “a disgrace”, nothing that the country lacks vital details on a group of people considered to have great influence on the market.