Nobody really knows to what extent foreign investors are bidding up Canadian home prices, especially in the hot markets of Vancouver and Toronto. Is non-resident money a leading actor in the real-estate market, or a bit player? To what extent are foreign students or residents with family abroad investing in Canadian real estate, and pushing up prices? Good questions – to which there are still no good answers.
Canada Mortgage and Housing Corp. is trying to gather more information; it keeps running into roadblocks. The great debate over why prices in some Canadian markets appear to be so bubbly has to be decided by data – which Canadian policy-makers lack.
There is no call for making Canada less welcoming of immigrants. The country needs them. But the federal government at least has to be able to understand how flows of people and money impact home prices.
In B.C., purchasers of real estate have to pay property transfer tax; in Ontario, it's called land transfer tax. Anecdotal evidence suggests that some buyers are fudging their status as foreign investors or non-residents, and that some real-estate agents, accountants and solicitors may be casting an uncritical eye on their clients' self-characterizations.
There's nothing improper about foreign investors owning land in Canada. But CMHC and other agencies need a better picture of what's happening in the real-estate market. These are six- and seven-figure purchases, and disclosure shouldn't be different from how authorities gather information on payments passing through the banking system.
Australia was quick to blame foreign investors for a property bubble, apparently with no more evidence than Canada has. There, foreigners can buy only new homes or land for new development. Real-estate bubbles still happen.
Should Canada follow the Australian approach? What effect, if any, would that have on home prices and the economy? Or should we leave the market alone? Unfortunately, given the lack of data, it's impossible to have an intelligent discussion about what's happening in Canada's real-estate markets, or how to respond.