Real Estate Transaction Taxes on Foreign Buyers in Greater Vancouver and Toronto and Their Effect on the Housing Market

Abstract

This paper uses housing price and transaction data to examine the effects of the Foreign Buyers Tax and Non-Resident Speculation Tax on the affected housing markets. These taxes were found to impact both housing prices and the number of transactions in the regions they applied. The Foreign Buyers Tax was found to initially decrease the monthly percentage change in housing prices by 1.73 percentage points, and later by 1.43 percentage points. This later effect is estimated when the scope of the tax was expanded, and the rate increased. The Non-Resident Speculation Tax was found to decrease the monthly percentage change in housing prices by 3.94 percentage points. The number of monthly transactions was also impacted by the taxes. The Foreign Buyers Tax decreased monthly transactions by 24 percent, and later by 30 percent. The equivalent effect was estimated at 38 percent for the Non-Resident Speculation Tax. These estimates should be interpreted as the short-run impact of the taxes within the year the tax was imposed.