Would You Like a 20% Drop in House Prices?

Canada’s plan to tax foreign investors is already working

Whilst this might sound appealing to those almost at the point of giving up on entering the market within the metropolitan area, there is a strong incentive for Governments to avoid this at all possible cost. It could actually be achieved if the desire was there; but Government revenue is now totally addicted to property taxes. About 52% of total tax revenue is derived from property taxes nationally. Over $49 billion in 2015/6!

This comes from transfer duties, land tax and council rates. How attractive would a 20% drop in values sound to them do you think. Also, expenditure by current owners who suffered a drop of this magnitude would be decimated. So something of a financial catastrophe. And then there’s the votes. Who will vote for a Government that oversees this sort of correction?

Changes to policy could create this sort of correction. For evidence, just look at the following article which notes the actual experience in Canada. Action on restricting foreign buying, if taken too far could replicate the experience here if desired. So when looking for what we would really like to happen, be careful what you wish for.