Tax foreign investors who buy Vancouver real estate: CIBC economist

The deputy chief economist at one of Canada's largest banks is calling for the taxation of foreign real estate speculators, saying it's the best way to cool down Vancouver's red-hot real estate market without causing a collapse.

Bejamin Tal says foreign investment not the only problem, but proper taxation would fix worst aspects

Benjamin Tal, CIBC's deputy chief economist, says taxing speculative behaviour on the part of foreign investors would help cool down Vancouver's housing market. (CIBC)

The deputy chief economist at one of Canada's largest banks is calling for the taxation of foreign real estate speculators, saying it's the best way to cool down Vancouver's red-hot market without causing a collapse.

CIBC's Benjamin Tal cautioned against stopping foreign investment entirely, saying it's only one of the drivers of high prices.

Instead, he said properly designed taxes could stop the most problematic types of market behaviour — specifically, the purchase of real estate with no intention of living or working in Canada, but instead as a profit-generating investment.

"We don't want to say that Canada is not accepting foreign investment — absolutely not," Tal told Early Edition host Stephen Quinn. "But some of them are doing it just to make quick money."

"This is basically speculative activity. Therefore, let's tax this activity."

Demand solutions for a supply problem

Tal pointed to New Zealand and Australia as jurisdictions with similar housing problems that have successfully implemented foreign ownership taxes. Australia, for example, only allows foreign investors to purchase brand new developments.

"Basically they say, if you build something new, at least you create some GDP — you create some economic momentum, you are employing people, you are adding something to the economy," Tal said.

"If you are playing the resale market, then you're really not adding anything to the economy."

But ultimately, Tal said Vancouver faces a fundamental supply problem, as do many other large cities such as Toronto, so solutions like taxation are limited in how effective they can be.

"Vancouver is an island ... from a real estate perspective," Tal said. "In Vancouver, you cannot deal with the supply, but you can deal with speculative aspect that the supply issue create."

"We are trying to fight supply issues with demand solutions."

With files from CBC's The Early Edition.