It has been a week since Canada decided to scrap the immigrant investor program that sped up the visa process to high net worth foreigners. This program established in 1986, allowed wealthy investors who had a net worth of at least $1.6 million to apply for citizenship after investing $800,000, interest free, with the government for a period of 5 years. According to Jim Flaherty, Canada’s Finance Minister, “For decades, [the investor scheme] has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require,”
The idea became so popular among foreign citizens, especially high net worth applicants from Mainland China, that there was a backlog and the program was paused in 2012. Since the program has been scraped, the government will be returning the 59,000 applications and the fees associated costing $2 million dollars.
Critics of the program
Critiques of the program say the program was unfair to Canadians because it drove up real estate prices unfairly, especially in metropolitan cities like Vancouver and Toronto. More than half of the applicants accepted had made the move and settled in Vancouver. Evidence has been shown that these investors pay the least amount of tax as they continue to work abroad and have their families live here paying little or no tax, as they are not working in Canada. In addition, a lot of empty condos and homes drive up property prices as the investors are actually residing outside of Canada.
How will this affect the real estate market?
No one can predict what will happen, but the mood is that this will have a negative effect on the real estate market and prices will lower, especially for the luxury homes. Some realtors in the Vancouver area say that this would be more noticeable on properties over $7 million. Others say that the Canadian housing market has remained strong and withheld the economic meltdown. These investor applications were on hold since 2012 and property prices were still on the move. They are confident that the housing market will continue to prosper due to our growing economy and current low mortgage rates. Either way, we’ll see how things pan-out during high season, Spring/Summer 2014.