Ontario, Canada brings in foreign housing tax to cool market

Nick Mcbride
April 21, 2017

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.

Rents are based on what the market can bear and, going by the very low vacancy rates in the GTA, Lobo thinks they're fair.

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.

A 15 per cent tax on home purchases by non-resident foreigners. The governor of the Bank of Canada has also said that the rate of increase in house prices in the GTA suggests the demand is being driven more by speculators than "just folks that are buying a house".

He says the measures will also look at how to expedite housing supply, and he has appeared receptive to Toronto Mayor John Tory's talk of a vacant homes tax.

The danger of governments imposing even more taxes on real estate (without increasing supply) is that they will be playing Russian roulette with the major asset of most homeowners - the market value of their home and the amount of equity they have in it.

The province of Ontario, where the red-hot Toronto housing market is located, will unveil a suite of 10 different measures to control housing prices, according to a report from the Toronto Star.

After two consecutive years of double-digit gains, average house prices in the Toronto region reached $916,567 in March 2017, up 33.2 per cent from a year earlier.

"There is a need for interventions right now in order to calm what's going on", said Wynne.

Prem Watsa, chief executive of Fairfax Financial Holdings, who profited handsomely by betting against the USA housing market before it crashed 10 years ago, told shareholders at his company' annual meeting in Toronto on Thursday that he expects a Canadian crash and that it would be painful.

The Ontario government unveiled its plan to implement a 15% tax on foreign home buyers and impose rent controls in an announcement on April. 20.

The Liberals have also said that the government is developing a "substantive" rent control reform that could see rent increase caps applied to all residential buildings or units.

Tim Hudak, CEO of the Ontario Real Estate Association, said the measures could help make homes more affordable for residents.

"We saw a 50 per cent increase in professionally managed, purpose-built rental apartment units past year in the Toronto area and there are 28,000 in the pipeline in the Toronto area", said Murphy, adding that 90 per cent of FRPO members who responded to a recent survey wanted to build apartments.

Ontario Premier Kathleen Wynne's administration will also take steps to boost supply: the Ontario Fair Housing Plan includes 12 measures, such as a targeted C$125 million ($93 million) five-year program to encourage building of new rental apartment buildings by rebating a portion of development charges.

Home sales across the country hit a record high last month, propped up by transactions in the fiercely hot market of Toronto, further fuelling concerns about the city's real estate sector.

"In some ways, we have to realize that this is a good problem to have", Wynne said in a briefing.

The province pledges to use surplus provincial land for additional affordable housing.

- Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are now excluded.

- An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.

The three politicians made the comments after a special meeting to discuss the housing situation.

The plan also includes establishing timelines for elevator fix so that they aren't broken so often in condos and apartments.

Other reports by VgToday

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