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Is a foreign buyers tax needed? Generations disagree

Baby boomers think it’s a great idea. Millennials don’t. Shouldn’t that be reversed?


 
Ontario Premier Kathleen Wynne speaks about Ontario's Fair Housing Plan during a press conference in Toronto on Thursday, April 20, 2017. (Christopher Katsarov/CP)

Ontario Premier Kathleen Wynne speaks about Ontario’s Fair Housing Plan during a press conference in Toronto on Thursday, April 20, 2017. (Christopher Katsarov/CP)

It’s been of the hottest topics this year in provincial politics in both British Columbia and Ontario. How do you cool an overheated real estate market? Both provinces have implemented a 15 per cent foreign buyers tax as a partial solution. Different generations are likely reacting very differently to the new levy, according to a poll conducted as part of The Canada Project. Baby boomers and millennials have different opinions on the efficacy of this tax and what how it will affect their ability to purchase a home.

Fully 82 per cent of baby boomers said they either “support or “strongly support” the foreign buyers tax compared to millennial respondents where only 69 per cent did so. It’s an odd outcome. Foreign buyers actually raise house prices, thus helping boomers, who are more likely to be homeowners, and hurting millennials, who are more likely to be looking for a first home.

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So what’s happening here? “What this shows is that people aren’t making the connection with how the Foreign Buyer’s Tax will affect their bottom line,” says Romana King, Director of Content at Zolo.ca, a tech-powered real estate brokerage firm based in Vancouver. “Boomers don’t understand that it’s likely to reduce the selling price of their home and millennials just don’t seem to have much of an opinion on it either way.”

Vickie Campbell, a certified financial planner with Ryan Lamontagne in Ottawa has a different view. “I think the results show that boomers see the Foreign Buyers Tax as a steadying influence on a market that’s out of control and they like that,” she says. “A lot of their wealth is tied up in housing so its nice not to have the volatility that we’ve been experiencing diminished for financial planning purposes.”

Campbell also notes that boomers likely see the tax as a good tool to cool the real estate market for their kids, who are either looking for homes or soon will be. “My theory is that this tax is best for the kids—the millennials who will be searching for a home. It’s all about what’s best for the kids at this point and boomers feel this will help.”

Heather Franklin, a certified financial planner in Toronto, also notes that since a lot of millennials aren’t in the market for real estate, they really don’t have an opinion on the foreign buyers tax at all. “I see two distinct groups of millennials—those who are underemployed and still in debt, so buying a home isn’t even on their radar yet,” she says. “And a second group who is interested in it because they are gainfully employed and in the real estate market themselves looking for a starter home.”

The Canada Project

Campbell agrees, and says we shouldn’t give up on millennials and their interest in the real estate market just yet. “They’re reading a lot about home ownership but they’re just not rushing into it,” says Campbell. “This is good. Waiting to get settled, out of debt and into a good paying job is a good thing. Home ownership will happen a little later for millennials—but it will happen.”


 

Is a foreign buyers tax needed? Generations disagree

  1. Says Romana King: “Boomers don’t understand that it’s likely to reduce the selling price of their home and millennials just don’t seem to have much of an opinion on it either way.”

    Romana King certainly seems to think boomers are a simple lot – unable to make a straightforward connection between reduction in demand and cost of product (one’s home in this case). Speaking for myself, I fully realize that the Vancouver foreign buyers tax could have a depressing effect on the value of my home. Yet, my quibble with the FBT is that it’s not high enough, and that it doesn’t apply to the sale of assignments. The reason I feel this way is that I have kids that will one day need to buy homes for themselves, and unless there are significant changes, that will be next to impossible for them and for the kids of lots of other folks. BC doesn’t owe those who live outside of the country anything, and it certainly doesn’t owe them an opportunity to make a quick buck off of the backs of people who live and work here. AFAIAC, BC should just ban non-permanent residents from buying residential properties here in BC.

  2. Such a disappointing article! Here’s the deal:

    Boomers like the taxes because they preserve their perception of real estate as a perpetual-motion moneymaking machine, and help restrict access to “the right kind of people” without challenging the root problems (interest rates, supply, bubble logic) which result in (for example) Toronto (a regional financial centre with no serious geographic constraints), having average deep suburb homes sell for a million dollars, or eight to ten times average family incomes.

    Millenials don’t like the proposed taxes because they’re window dressing on a fundamentally unbalanced system that give the illusion of action while scapegoating “the other”. They preserve the idea that there is no ‘right’ price for homes, there’s only a ‘right’ direction. House prices should go up, and anyone who doesn’t benefit (along with the median voter, the banks, and every home-owning politician) was either too lazy to buy, or too dumb to be born in the right decade.

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