Briefing highlights
- CIBC economist suggests taxing foreign home flippers
- Penn West warns on future
- Video: How to build a perfect to-do list
CIBC calls for action
CIBC’s deputy chief economist is calling for a tax on foreign speculators flipping Canadian real estate properties, helping to drive up home prices in the country’s hottest markets.
Flipping has become a burning issue in Canada as prices in cities like Vancouver and Toronto surge, putting the cost of a home out of reach for many and sparking fears of a bubble.
Most economists in Canada do not believe a meltdown is on the horizon but some have fretted openly about the frothy nature of those cities.
“We know that flipping is not the main motivation among foreign investors, but it does exist,” said Benjamin Tal of Canadian Imperial Bank of Commerce.
“Applying a flipping tax on foreign investors might be a step in the right direction,” he added in a recent research note.
“It won’t solve the problem, but it might be an effective way to remove the most problematic element of foreign investment in Canadian real estate.”
Investors in several countries enjoy a hefty discount in Canada because of the lower loonie. And by many accounts, cities such as Vancouver, Toronto, Victoria and Hamilton show no signs of slowing down, meaning a pretty penny could be earned.
But Canada lacks information on the level of foreign investment in the real estate markets, and has no numbers that peg the amount of flipping.Mr. Tal said he spoke recently to several real estate brokers, and learned that foreign investment likely is not as big an issue as believed.
Flipping isn’t at the heart of it for many, he said, but rather buying a home for a “satellite family situation,” say a spouse or child studying here.
Canada isn’t alone. Other countries have introduced measures amid what BMO Nesbitt Burns chief economist Douglas Porter described as a global trend, with property values surging along with low or negative interest rates and “a wave of investment dollars” looking for a home.
He noted that policy makers are “slowly” beginning to act, with proposals for registries or tax surcharges on investors who pay no income tax, but he sees no urgency.
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Penn West in talks
Penn West Petroleum Ltd. is raising questions over its future, which it says depend on talks with its lenders.
As it released quarterly results today, the company also said it’s talking to lenders, trying to change its covenants.
“Our ability to continue as a going concern depends on the ability to enter into amending agreements with our lenders,” it added.