Nanos Research chairman Nik Nanos told The Australian Financial Review that real estate was the "canary in the mine" for the Canadian economy and the foreign acquirer tax has had an immediate "chill" effect on confidence.

"If we see a significant slide in confidence in real estate there will be an immediate negative knock-on effect on the Canadian economy because right now there is no energy [oil] economy to fall back on," he said.

The price of Canada's biggest export, oil, has crashed over the past two years, much like iron ore and coal prices in Australia.

Price surge

Like Sydney and Melbourne, real estate prices in Canada's most-liveable cities have surged in recent years.

The new Sea to Sky Gondola near Squamish, about 60km, north of Vancouver has drawn increasingly more visitors to the Sea to Sky Corridor, driving home prices higher here. FDC

A combination of low borrowing costs, strong demand, limited housing supply because of red tape and, anecdotally, foreign buyers mainly from China seeking to park their money in perceived safe havens offshore, pushed up values.

Vancouver house prices soared 30 per cent in the year ended May 31, and prices shot up 15 per cent in Canada's biggest city of Toronto. The median price for detached houses in Vancouver jumped to $C1.6 million.


The foreign buyer tax, introduced after a flurry of Chinese buyers were accused of pushing up prices beyond affordable for everyday Canadians, is sharply higher than similar taxes recently increased by NSW, Victoria and Queensland.

The Baird government in June announced a 4 per cent stamp duty surcharge for foreign buyers in NSW, adding $40,000 to the cost of a $1 million property and taking the total stamp duty to $80,490.

Victoria in May more than doubled the surcharge for foreign buyers to 7 per cent, while Queensland will charge 3 per cent from October.

Unsustainable expectations

To be sure, Canadian house prices have not fallen yet. About 41 per cent of those surveyed said they see home prices rising and 36 per cent believe there will be little change in values.

The market is cooling in the previously red hot area of Vancouver, even before the new property transfer charge for foreigners was unveiled.

Like Australia, the International Monetary Fund has pointed to financial risks associated with Canada's hot housing market.

Echoing Reserve Bank of Australia governor Glenn Stevens, Bank of Canada governor Stephen Poloz recently warned that prospective homebuyers should not expect the recent price surge to repeat.


"If prices are going up because people expect prices to go up, then that, of course, is probably unsustainable," Mr Poloz said in June.

He did not say what would happen if people expected prices to fall.

Sentiment can be a key driver of asset values.

Whether the rising Canadian pessimism on housing transmits to actual price declines remains to be seen.

For property-obsessed Australia, Canada could be a handy barometer to see if the market will finally be tipped over the edge.