A protectionist move by officials in Ontario seeks to deal with high housing demand and a potential real estate bubble, but analyst Priti Agarwal believes the controversial step is only a band-aid.

“Residential property prices in Toronto have been gushing upwards driven by low inventory levels, low interest rates and increasing population of immigrants,” Agarwal, an analyst at global research firm Aranca, told Toronto Business Daily. “The government of the province of Ontario announced certain measures to battle this price bubble, which includes a 15 per cent transfer tax imposed on foreign buyers. This is targeted at non-Canadian citizens and corporations purchasing residential properties containing one to six units in the greater Toronto area.”

Similar moves by officials in Vancouver in 2016 had critics, including the city’s mayor, who said the move was tantamount to “discrimination,” according to coverage by the Globe and Mail.

Agarwal said some of the flaws in the Vancouver plan translate to what Toronto’s government is doing.

“In our opinion, the outcome of levying tax on non-Canadians purchasing homes in Toronto would be very similar to Vancouver, unless steps are taken to alleviate the dearth in supply, which would help rein in home-price growth,” Agarwal said.

Agarwal said home prices and sales in Vancouver slumped last year, which she said reflected the influence of the new tax there.

“The impact (of Vancouver’s tax) was short-lived as the prices have started to move up in the recent months,” Agarwal said. “We think the tax levy did little to tame prices in Vancouver because the government’s tax model was targeted at inflated demand, rather than boosting the limited supply.”

With average home prices rising 33 per cent year-over-year in March, applying the tax on non-citizen buyers is a way to tamp down demand but not one that’s applied across the board. In addition to concerns about efficacy brought by analysts like Agarwal, other critics could take issue with the idea that non-residents are a separate class to be taxed out of real estate purchases. Look for more as market changes continue to impact an overheated real estate market.