Do Foreign Buyer Taxes Affect House Prices?

Abstract

This paper studies the impact of foreign buyer taxes on house prices using recent law changes in Canada, Australia, and New Zealand. Counterfactual house prices are estimated for each treated location combining prediction techniques from machine learning with inference methods from the Synthetic Control Method literature. In general, foreign buyer taxes have negative, large, and persistent effects on house price growth. We find bigger effects in locations with bigger taxes and with higher immigrant shares. Alternative outcome variables, including population growth, GDP growth, and unemployment rates were either unaffected or slightly affected in ways that do not confound our results.

Keywords: Housing, House Prices, Foreign Buyer Taxes, Vacancy Taxes

JEL Classification: R0, R3, G0, E21, E44, G2