Will a new foreign property buyer's tax cool Toronto's housing market?

Marcus Newton
April 22, 2017

Josh Gordon, an assistant professor at Simon Fraser University who studies the housing markets in Ontario and British Columbia, said one way to tax "non-resident speculation" would be to levy a foreign buyers tax but refund or offset it according to income tax paid in the province.

The new legislation would also allow Toronto-and possibly other municipalities-to table a tax on vacant homes.

While foreign speculation does not appear to be as rampant here as in Vancouver, the tax is bound to let at least a little air out of the balloon, as the government works on other measures.

"In the coming week, the Ontario government will announce a suite of measures created to increase supply and address demand", he said.

The decision by the province of Ontario's government will impose a 15 per cent "Non-Resident Speculation Tax" on non-Canadians and non-permanent residents buying residential properties in the metropolitan area of nearly 7 million people.

"If we look at what economists are saying, look at what folks who are trying to buy a home are saying, it's really gotten to the point where it is out of control and we need to do something", she said.

His Ontario counterpart, Charles Sousa, says the provincial budget that he will table next week will include a package of measures aimed at improving house affordability in the Greater Toronto Area.

The average cost of a Toronto home jumped 33.2% over the past year, from an average of $688,000 (US$510,600/£398,000) in March of 2016 to $917,000 (US$680,000/£530,500) in March of 2017. The price rises reflected confidence in Ontario's economy but when young people could not afford homes, "we know we have a problem and we know we have to act", she added.

The province will also expand rent control, which now only applies to units built before November 1991, after tenants in newer units complained of dramatic spikes in rent.

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The new plan will expand rent control to include all Ontario buildings constructed after 1991. Those have averaged two per cent in the last 10 years and this year it is 1.5 per cent. I am pleased that the government will activate surplus provincial land like the West Don Lands to create new affordable housing, something I have been urging the Premier to do for some time.

Home sales plunged and price growth stalled for months in Vancouver following the B.C. government's introduction of a 15 per cent tax on foreign buyers last August.

The issue has become a headache for the province's Liberal government, which is trailing the Progressive Conservatives in polls ahead of an election in June next year, and lawmakers face a hard balancing act to find policies that will stabilize prices without crashing the market.

The province is introducing a five-year $125 million program to encourage construction of purpose-built rentals, units built especially for renting and not owning.

This set of 16 comprehensive measures would help more people find an affordable place to call home, while bringing stability to the real estate market and protecting the investment of homeowners.

- More flexibility for municipalities when it comes to using property tax tools to encourage development.

It was a record-breaking month for Canadian real estate in March.

Officials from Canada and its most populous province will meet later on Tuesday, under pressure from voters angry that speculators or foreigners are fueling unsustainable price gains.

Other reports by MaliBehiribAe

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