Ontario sets tax on foreign buyers to cool Toronto housing market

Robyn Valdez
April 21, 2017

"These are a measured set of responses to ease the enormous pressure that people are under right now", said Ontario Premier Kathleen Wynne at a news conference, where she relayed stories of families losing multiple bidding wars for houses and finding themselves priced out of the market.

A foreign buyers tax will slow but not stop money coming from Chinese investors, said real estate broker Tony Ma, whose HomeLife Landmark Realty Inc is one of the largest brokerages in Toronto serving buyers of Chinese descent.

The tax - part of proposed legislation unveiled on Thursday by the Ontario provincial government - will be levied on houses purchased in the Golden Horseshoe, an area that stretches from the Niagara region and the Greater Toronto Area to Peterborough.

The tax would not target immigrants and a rebate would be available to people who subsequently get citizenship or permanent resident status, as well as foreign nationals working in Ontario and global students.

The cost of a detached home in Toronto roared to a new record high of nearly $1.6 million in March, a 33 per cent climb over prices past year, according to the Toronto Real Estate Board (TREB). He also said the Canada Revenue Agency will put resources toward ensuring tax compliance, but shut down a previous request from his Ontario counterpart to change the taxation of capital gains on the sale of homes that are not classified as a primary residence.

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Further, the approach to lowering Toronto's housing prices attempts to solve numerous issues without considering whether government measures, such as restrictive zoning or current rent controls, have contributed to these woes in the first place. At the same time, we recognize the need to protect the significant investment homeowners have made.

But Geordie Dent, a representative of the Federation of Metro Tenants Associations, says it's a myth that rent control limits the construction of new rental-specific homes.

Tenants may be breathing a sigh of relief, but rent control was not welcome news for everyone. "That will mean incentives they will have to provide at the same time as they announce whatever it is they are going to do about rent control to encourage people to build this housing". Tal said the drop was due to domestic buyers waiting to see what the impact of the tax would be, but they are now back in the market.

Ontario's provincial government on Thursday introduced 16 measures created to cool the red-hot property market in Toronto and the surrounding region. "Frankly, it's a free market and market forces will prevail ultimately as we proceed forward", Sousa said.

Toronto Mayor John Tory has been calling for a tax on vacant homes, and Wynne says Ontario will give Toronto and other interested municipalities the power to impose such a tax to encourage owners to sell or rent such spaces. It would match the 15 percent tax on foreign home buyers that the Pacific coast city of Vancouver has implemented.

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The good news is that the measures announced today are unlikely to send the market into a tailspin.

This week, CBC's Here and Now interviewed 25-year-old Nicole Meredith, who was forced to move when her rent jumped $425 per month after a new company purchased her building.

Home buyers and renters may benefit from these policies 5-10 years from, assuming the measures taken to improve supply actually result in an increase in the supply of housing.

Ontario's finance minister, Charles Sousa, is concerned about speculators - or "property scalpers" as he calls them - driving up house prices.

The government's plan to match residential tax rates with multi-unit residences will make it easier for landlords to offer affordable rents and for condo builders to contain prices, said De Silva of the Board of Trade.

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