Prime Minister Stephen Harper made a campaign pledge to protect Canadian families against foreign real estate speculators who may be driving local families out of the market.
As much as 15 percent of condominiums in Vancouver sit unoccupied, Harper said Wednesday in a speech from the west-coast city. Demand from domestic buyers and those from countries such as China has pushed the average price for a detached Vancouver home to C$1.1 million ($900,000) in July, up 16 percent from a year earlier.
“There are real concerns that foreign non-resident real estate speculation is the reason some Canadians families find house prices beyond their budgets,” he said. “If such foreign non-resident buyers are artificially driving up the cost of real estate, and Canadian families are shut out of the market, that is a matter we can and should do something about.”
By making his second housing announcement since opening the longest campaign in modern history, Harper is spotlighting the real estate market, which has avoided the worst of the damage from a collapse in oil prices that may have triggered a recession. Home prices are rising this year on low interest rates and employment growth.
The gains have evoked warnings from Canada’s central bank and private economists about record debt burdens that have built up as families vie for more expensive homes. Household debt was 163.3 percent of disposable income in the first quarter. Bank of Canada Governor Stephen Poloz has cut interest rates twice this year to boost growth and said housing-market excesses should be contained with “macro-prudential” policies.
Harper also said Wednesday if he wins the Oct. 19 election he would raise the cap on the Canadian Home Buyers’ Plan, which allows first time buyers to make down payments by withdrawing funds from tax-sheltered retirement savings accounts, to C$35,000 from C$25,000. That follows his Aug. 4 pledge for a 15 percent annual tax credit for home renovations worth between C$1,000 and C$5,000. That measure would cost C$1.5 billion.
The government doesn’t have enough data now to figure out if foreign speculation is to blame for high home prices in Vancouver and Toronto, Harper said, and he didn’t lay out any specific remedies in his speech. The U.K. and New Zealand use “tax tools” to curb speculation and Australia uses regulations to limit foreign investment in housing, according to a paper circulated by Harper’s Conservative Party.
“A re-elected Conservative government will commit to collecting comprehensive data on the foreign non-resident purchase of Canadian real estate and as necessary, in coordination with the provinces, we will take action to ensure any foreign non-resident investment supports the availability and affordability of homes for Canadians,” he said.