UHT

The Canadian government has a new urge to drive investors out of the country. The dawn of 2023 brings several hardships for Non-Canadian Non-Residents. One is the so called “Underused Housing Tax” (UHT), targeting houses in densly populated areas that are not rented out “at arm’s length” and are therefore a cause for the housing crisis Canada faces. The UHT comes at a 1% p.a. tax rate, calculated on the value assessed in your yearly property valuation. However, being a Non-Resident, this is the uncapped value of the real estate and therefore climbs sharply year after year.

In addition to this tax, Non-Residents are banned from buying real estate in Canada for 2 years (2023 and 2024). This will most likely result in a decline of value in areas, where demand is already lower but will change nothing in the targeted densly populated cities. The foreign investor is rather the solution for the Canadian housing crisis than the problem, as most foreign investors will either buy property in rural areas, where they will not affect the housing market but will (with the investment, the renovation and their interest in the area) thrive development of those neclected parts of the country. Or the investors have bought housing in densly populated areas to either renovate and rent it out or to rebuilt (e.g. form a multiplex out of a big unit) and sell. Both, renting out and selling, is contributing to the housing market and therefore was a solution for the crisis.

With the new laws enacted, we will see less of both positive effects. Therefore, what is this new urge of the Canadian government to drive foreign investors out of the country? Don’t we want the money? Don’t we want the employment and the positive effects? The funny thing is, that on the other hand immigration shall be increased dramatically. So the question is not, whether Canada does not like foreigners but rather, which kind of foreigners does Canada like?