New rules announced Monday by the federal government probably won’t have a negative effect on Canadian businesses looking to recruit foreign talent, experts say.
Finance Minister Bill Morneau unveiled a handful of changes linked to tax law and mortgages during a stop in Toronto, marking the latest in a string of government interventions designed to put the brakes on white-hot housing markets in Vancouver and Toronto.
READ MORE: Surge in foreign buying in Metro Vancouver real estate market days before new tax took effect
One of the changes involves closing a loophole that allowed foreign buyers who are not residing in Canada to purchase property here, then sell it at a profit — all the while escaping federal tax on whatever money they make in the flip.
Unlike the 15 per cent foreign-buyer tax that recently came into effect in British Columbia, this change only affects a certain subset of foreign buyers, said University of Toronto assistant professor Walid Hejazi.
“These policies are really targeted towards people who are buying homes but not living in them,” said Hejazi, who teaches International Business at the Rotman School of Management.
WATCH BELOW: Morneau explains what steps government is taking to crack down on foreign homebuyers
From the perspective of foreigners who are recruited by technology start-ups or other companies and actually move to Canada, he explained, cracking down on the tax-loophole could result in a stabilization of the real estate market. And that could mean more affordable homes when they arrive.
READ MORE: Class-action lawsuit launched against B.C. foreign home buyers’ tax
Bill Tam, president and CEO of the BC Tech Association, also saw no major problems with the changes. As B.C.’s tech industry has exploded, he said, one of the biggest hurdles has been convincing people to move to metro Vancouver, where the cost of a modest home can easily top $1 million.
“The ability to attract people, not only locally but on a global basis, continues to be one of the biggest challenges,” Tam said.
“I think anything that provides further stability in the market — where we can actually sort of ease the affordability challenge — is probably something in the long-term that benefits the tech sector here, and probably on a national basis.”
He added that stabilizing the housing market will involve “a series of steps,” and it’s just one of several things the government can do to bolster tech companies. Others include investing in post-secondary institutions to produce more skilled graduates and fill jobs, Tam said, and the removal of some of the “impediments” in the immigration system that keep foreign workers from moving here.
READ MORE: Ottawa’s new mortgage requirements could make it harder to secure a mortgage
According to Hejazi, the moves made by Ottawa on Monday were appropriate. But he said it’s important to remember that any regulatory change has an effect across the country, not just in big cities.
Over-reaction from Ottawa in an effort to cool the housing market could prove disastrous, he warned, if real estate prices were to suddenly take a sharp dive and people lost big on the value of their homes. But failure to do anything could result in a future where foreign speculation takes over almost completely, and Canadian residents simply can’t afford a home at all.
“It would be a big problem,” he said. “Governments need to manage this very, very carefully.”
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