The loonie’s strength has made property acquisitions more “punitive” for foreign buyers who already have to contend with a levy, Guatieri said.
“A cheaper Canadian dollar would probably encourage foreign investors to thumb their nose at the tax,” Guatieri told BuzzBuzzNews
And while BMO has already called on the Bank of Canada to continuously monitor its July increase to the overnight rate, the economist noted that a consistently strong Canadian dollar would have more of an impact on foreign investment as overseas nationals do not tend to get mortgages in Canada to finance their real estate purchases.
“I presume they’re borrowing the money, if they need it, in their home country,” he said.
However, Guatieri warned that the loonie might plunge below the 78-cent mark in the next 6 to 10 months, “barring an upswing in oil prices.”
According to Shaun Hildebrand, senior VP of condo data firm Urbanation, noted that the current versions of foreign home buyers’ taxes in Canadian markets will do little to stem the tide. This is because of the presence of several possible loopholes, such as international students being able to qualify for a rebate on the tax in Ontario.
“So, it is highly unlikely the new 15 per cent Non-Resident Speculation Tax will have any material impact on condo sales, given the rebate available,” Hildebrand said after the announcement of Ontario’s Fair Housing Plan.
The recent resurgence of the Canadian dollar is making foreign buyers’ taxes in markets across the country more effective in stifling the influx of overseas real estate investors, explained BMO senior economist Sal Guatieri.