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Non-Resident Taxes and the Role of House Price Expectations

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  • Mikael Khan
  • Matthieu Verstraete

Abstract

In recent years, the governments of Ontario and British Columbia have imposed taxes on purchases by non-Canadian residents of residential properties in certain jurisdictions. The outsized decline in housing resales observed after these taxes were implemented suggests that the taxes altered residents’ housing market expectations. Using data from the Canadian Survey of Consumer Expectations (CSCE), we show that house price expectations played a material, albeit temporary, role in observed housing market dynamics following the implementation of the non-resident taxes. This effect was more pronounced in Metro Vancouver than in the Greater Golden Horseshoe Area.

Suggested Citation

  • Mikael Khan & Matthieu Verstraete, 2019. "Non-Resident Taxes and the Role of House Price Expectations," Staff Analytical Notes 2019-8, Bank of Canada.
    • Handle: RePEc:bca:bocsan:19-8
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    References listed on IDEAS

    as
    1. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366, Elsevier.
    2. Lefebvre, Pierre & Merrigan, Philip & Verstraete, Matthieu, 2009. "Dynamic labour supply effects of childcare subsidies: Evidence from a Canadian natural experiment on low-fee universal child care," Labour Economics, Elsevier, vol. 16(5), pages 490-502, October.
    3. Marc-André Gosselin & Mikael Khan, 2015. "A Survey of Consumer Expectations for Canada," Bank of Canada Review, Bank of Canada, vol. 2015(Autumn), pages 14-23.
    4. Mikael Khan & Matthieu Verstraete, 2018. "Personal Experiences and House Price Expectations: Evidence from the Canadian Survey of Consumer Expectations," Staff Analytical Notes 2018-8, Bank of Canada.
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    Cited by:

    1. Mikael Khan & Taylor Webley, 2019. "Disentangling the Factors Driving Housing Resales," Staff Analytical Notes 2019-12, Bank of Canada.

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    More about this item

    Keywords

    Financial stability; Housing;

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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