Montreal could soon join Toronto and Vancouver as the latest Canadian metropolis to implement a foreign buyer tax.
Amid escalating prices, Valerie Plante, Montreal’s mayor, a couple of weeks ago mused about implementing a foreign buyer tax, which her party, Projet Montreal, initially proposed a year and a half ago.
However, according to Carrie Law, CEO and director of Juwai.com, the largest website in China for international real estate, the tax would indirectly harm two-thirds of Montrealers. Moreover, claims Law, Chinese buyers actually help the city’s renters.
“A foreign buyer tax would favour the one-third of Montreal households who are owners over the two-thirds who are renters,” said Law. “That means two out of three care more about rents than prices. I do agree that buyers from China play an important, minority role in certain parts of the condo market. Most new condos bought as investments by foreign buyers will end up as rentals. The current condo boom could lead to foreign buyers financing lower rents for locals. It’s hard to understand why the government opposes the possibility of lower rents. Rents have a bigger impact on many more people than do prices.”
Montreal’s municipal government doesn’t have the power to institute a housing tax, so any levy on foreign buyers would likely come from the provincial government.
A foreign buyer tax isn’t favourable for a portal like Juwai.com, but Law nevertheless believes Projet Montreal has a poor grasp of what is really occurring in Montreal.
“Would the tax address the issues its supporters claim it does? No,” she said. “We believe fears about affordability in Montreal are exaggerated. Affordability is actually what’s driving prices up, in the form of high employment and low interest rates. Foreign buyers are in no way driving market-wide price or sales trends. That’s preposterous on the face of it.”
Martin Rouleau, a Montreal-based broker with Engel & Völkers, questions the assertion that foreign buyers are, in fact, speculators who are hedging asset appreciation at the expense of local residents. Rather, they’re moving to Montreal permanently. While they may play a role in price escalation, foreign buyers still only comprise a miniscule percentage of overall buyers.
“Overall, there’s not enough volume to make it problematic in the short- or medium-term, but some sectors are more affected by others,” he said. “Kirkland, Brossard, Westmount, the Town of Mount Royal, they increase demand where there’s very low inventory, so it’s normal for prices to go up.”
Montreal is riding a wave of optimism the likes of which it hasn’t seen in over four decades, much of which is predicated on its rejuvenated economy. It only stands to reason, then, that real estate values will enjoy a boost, says Rouleau.
“There is a world of craze for Canada, but especially Montreal,” said Rouleau. “We are an ‘in’ city at the moment, likely to become the ‘Boston of Canada’ with our universities. We are North America’s Latin city, with an ecological Scandinavian side, and overall good balance. Everything is falling into place here.”
Law is more direct in her criticism of Projet Montreal’s proposal, believing myopia will result in real harm down the road.
“Even if you believe there is a problem, which we don’t, it is bad governance to put in place a permanent tax to fix a short-term, so-called problem,” she said. “In a year or two, when interest rates are back up and jobs are back down, people will wake up and wonder how to get rid of the tax.”