Canada open to more measures to curb housing speculation, minister says

OTTAWA (Reuters) – Canada’s ruling Liberals are eyeing extra measures to curb housing hypothesis after introducing a international purchaser ban and heftier taxes on property flippers of their price range earlier this month, the housing minister stated on Thursday.

Minister Ahmed Hussen, requested about imposing additional measures to sluggish investor exercise corresponding to requiring bigger down-payments for second, third or subsequent properties, didn’t rule out the choice.

“We’re curbing hypothesis by doing quite a lot of issues … but in addition we haven’t closed the door to additional measures,” Hussen instructed Reuters in an interview. He famous that Canada’s tax and actual property programs are advanced, which complicates the method.

“We now have to review additional and actually look at carefully what additional measures we will take to cope with points round hypothesis,” he stated.

Housing costs have surged greater than 50% within the final two years, pushed by low rates of interest, a want for more room and speculative exercise. The Financial institution of Canada discovered traders now purchase one in each 5 properties.

GRAPHIC: Canadian residence costs skyrocket

Scorching housing helped drive Canada’s inflation charge to a 31-year excessive in March. Worth and gross sales development are anticipated to remain elevated this yr, however average by late 2023 or early 2024, Canada’s nationwide housing company stated Thursday.

To curb hypothesis, the federal government is setting up a brief ban on international consumers and a brand new measure to extra absolutely tax properties resold inside a yr of buy.

Underneath the present tax system, a house purchaser who leaves property empty solely to promote it a number of months later is taxed the identical because the one who owns a property and rents it out for many years, earlier than promoting.

“Proper now our tax system treats two eventualities the identical, and now we have to alter that,” stated Hussen.

The minister was assured that the ban on international consumers, which shall be in impact for not less than two years, will “definitely create extra properties for Canadians.”

International homeowners maintain a comparatively small share of Canadian properties, however have an outsized function in sure markets – like freshly constructed city condos – serving to drive value escalation, specialists say.

However critics say extra must also be achieved to curb home hypothesis, together with requiring bigger down-payments for funding properties.

Canadians should buy a principal residence with simply 5% down, supplied they qualify for mortgage insurance coverage. For second and subsequent properties, a 20% down cost is required, although consumers can faucet their home-equity strains of credit score to pay it.

Canada’s monetary regulator on Thursday highlighted a housing market downturn as one of many dangers dealing with the nation’s monetary system.

Reporting by Julie Gordon in Ottawa; modifying by Jonathan Oatis

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