Federal Immigrant Investor Program Scrapped

The federal program to attract wealthy immigrant investors has been scrapped in the new budget after being suspended for about 2 years with a backlog of over 45,000 applications in the system. This will no doubt directly impact the high end price surge experienced primarily in Vancouver and Toronto for the past few years. The popular BC Provincial PNP immigrant investor program targeted at small business operators granting immigration for investment in small qualifying business has NOT been affected at this time. BCREA ECONOMICS NOW Cancellation of the Canadian Investor Immigrant Program - February 13, 2014 In its recently tabled budget, the Federal Government effectively cancelled a program, the Canadian Immigrant Investor Program (IIP), which afforded wealthy prospective immigrants access to fast-tracked immigration.  The program, which began in 1995, allowed immigrants with $1.6 million or more in assets (the amount was increased from $800,000 in 2010) to make an interest free loan to the Canadian government of $800,000 for a period of 5 years in return for Canadian citizenship. At the end of the five-year term, the principal of the loan was returned. The IIP was a popular avenue for those with significant wealth to immigrate to Canada. An average of 7,100 people entered through the program each year from 1995 to 2012. Traditionally British Columbia has been a popular final destination, with an average of 3,300 immigrants locating in BC since the program’s inception. That number peaked from 2008 to 2010 at approximately 5,650 but slowed to just 2,600 in 2012 as new applications were halted while the Federal Government determined the future of the IIP. It is important to note that these numbers include all members of the household, and so to get a more accurate estimate of the number of new household formations, it is common to divide the total number by the average immigrant household size.   Therefore, we estimate that an average of 1,200 households per year located in BC through the IIP from 1995 to 2012, with that number climbing to 2,100 during the peak years of 2008 to 2010 and falling off to 1,430 in 2011 and just 979 in 2012. Data available for 2013 indicates a similar number of immigrants through the IIP as in 2012. The impact of the IIP on the economy and the housing market of British Columbia as a whole is relatively insignificant.  At its peak, immigration through the IIP represented only 13 per cent of total immigration to BC, and most years it has been less than 10 per cent. That said, the impact of 1,200 to 2,100 new millionaire households settling each year in select Vancouver neighborhoods has likely been a factor in rising single-family home prices in those areas, though far from the most important factor.  If there is any impact from the Government’s decision, we anticipate it will be contained to the very high-end of the real estate market. Notably, we have not observed an uptick in inventories in those areas most impacted by the IIP, even as immigration through the program has dropped by half. From Yahoo News: It appears that Canada's Immigrant Investor Program (IIP) will be no more. Up until 2012, the IIP offered 2,500 visas a year to affluent foreign nationals — mostly from China — who simply invested $800,000 into Canadian government coffers for a period of 5 years. The popular program, however, was suspended in July 2012 due to excessive processing backlogs. Now, according to the Globe and Mail, Finance Minister Jim Flaherty will announce — as part of Budget 2014 — that the program will be shelved for good. "Sources say the government believes the immigrant investor class of newcomers pays significantly less taxes over the decades than other economic immigrants, have less proficiency in English or French and are less likely to actually reside in Canada than other arrivals." Most Western countries have immigrant investor programs who some disparage as a 'visas for sale' program. The United States, for example, has its EB-5 Regional Centre scheme, which allocates 10,000 Green Cards a year for individuals who invest $500,000 into one of over 200 U.S. Government designated investment funds across the country. The justification for such programs — all around the world — is that they create jobs. According to the Association to Invest in USA (IIUSA), the EB-5 program accounts for the creation of over 95,000 American jobs since 2005. Moreover, IIPs buoy a country's economy by welcoming high net-worth individuals who spend lots of money to buy houses, cars and other luxury items. In fact, according to a March 2010 study, Canada's IIP provided an annual economic contribution of $2 billion. Toronto-based immigration attorney Michael Niren argues that the government's decision is short-sighted. "This is typical of the government's mentality seeing immigration as primarily a source of tax revenue. In their wisdom the government has deemed the investor program for Canada as not yielding enough of a return on investment to continue with the program. But consider the facts," he told Yahoo Canada News in an email exchange. "Why would any country close the doors to high net-worth individuals who are required to invest hundreds of thousands into the economy as part of the visa process? Makes no sense at all. These immigrants and their families are a great resource for Canada on all levels. "The problem with the investor program is that it has been mismanaged from the start. Investor programs work if they are managed right."