The foreign buyers tax introduced in British Columbia and Ontario is the wrong way to tackle the issue and risk make the situation worse, the Montreal Economic Institute says.

Economist Mathieu Bedard has authored a report calling for the provinces to scrap the taxes and focus on zoning and land-use policies which have been driving up prices for more than 50 years.

"When these policies become too restrictive, housing prices skyrocket and the burden falls disproportionately on the poorest, with fewer affordable housing units being built in favour of more luxurious housing units. This gentrification phenomenon has been happening in Toronto, Vancouver, and Montreal for some time now," explains Bédard.

Rent control is another policy criticized by the economist. He says that it makes rental units less profitable for owners, leading to lower levels of construction, which increases rents.

The MEI has welcomed the decision of Quebec’s finance minister to not follow his peers.

"Taxing foreign buyers is not the solution for reining in the hot housing markets in certain parts of the country. Carlos Leitão seems to have understood that such a policy would have negative effects on the market," said Michel Kelly-Gagnon, President and CEO of the MEI.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

More market watch: