By Julie Gordon

OTTAWA, Reuters – Canada’s Liberal government is looking at additional measures to reduce housing speculation. They introduced a ban on foreign buyers and a higher tax on property flippers earlier in the month.

When Minister Ahmed Hussen was asked about further steps to reduce investor activity, such as higher down payments for subsequent, second or third homes, he did not deny the possibility.

Hussen said in an interview that while we are reducing speculation, “we haven’t stopped the doors to more measures” Hussen noted the complexity of Canada’s real-estate and tax systems, complicating matters.

He stated that “we have to further study and look closely at what other measures we can use to combat speculation”

The last two-years have seen housing prices rise by over 50%. This is due to low interest rates, increased demand for space, and speculation. According to the Bank of Canada, investors are now buying one out of five homes.

GRAPHIC: Canadian home prices skyrocket https://graphics.reuters.com/CANADA-HOUSING/PRICES/klpyklgaypg/chart.png

Canada’s March inflation rate hit a record 31-year low thanks to hot housing. Canada’s national agency for housing said that while sales and price growth should remain high this year, they are likely to moderate in 2023-2024.

The government has put in place temporary restrictions on foreign buyers as well as a measure to tax more thoroughly properties that are resold within one year after purchase.

According to the current tax system, the home buyer who left property unoccupied and then sells it later on is subject to the same tax as someone who has owned a property but rented it for years before selling.

Hussen said, “Right now, our tax systems treats two scenarios exactly the same. We have to change this.”

Minister was optimistic that Canada’s ban on foreign buyers will create new homes. It will remain in place for at least 2 years.

Although foreigners make up only a tiny percentage of Canadian houses, their influence in specific markets is significant, such as urban condominiums that have been recently built, which can drive upward price pressure, experts claim.

Critics argue that more needs to be done in order to stop domestic speculation. This includes requiring higher down payments for investments properties.

Canadians are able to buy their principal residence for as little as 5%, provided that they have mortgage insurance. The 20% down payment for second and subsequent homes is mandatory. Buyers can however tap into their home equity credit lines to make it affordable.

Canada’s Financial Regulator on Thursday acknowledged that the financial system is at risk from a possible downturn in Canada’s housing market.