Published: Fri, April 21, 2017
Money | By Oscar Reynolds

Ontario, Canada brings in foreign housing tax to cool market

Ontario, Canada brings in foreign housing tax to cool market

Toronto Mayor John Tory issued a statement on Ontario's housing plan: "I welcome numerous actions announced by Premier Kathleen Wynne's government today".

The provincial Liberal government has come under increased pressure to do something about housing in the Greater Toronto Area, where the average price of detached houses was $1.21 million in March, up 33.4 per cent from previous year.

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

Wein said everyone, government included, needs to be careful not to rely on "anecdotal" stories about the real estate market.

As first disclosed by the Star, Wynne is imposing a 15 per cent foreign buyers' levy - the non-resident speculation tax - to slow down southern Ontario's skyrocketing real estate market that the Bank of Canada has warned is unsustainable. She says they are taking aim at speculators and are tackling affordability.

Ontario's Liberal government, trailing the Progressive Conservatives in opinion polls ahead of an election in June 2018, had also come under pressure to respond to growing public frustration about the role foreign buyers are playing in the Toronto market. Asian investment in Toronto reportedly picked after Vancouver introduced its foreign buyer tax last summer.

Ontario Housing Minister Chris Ballard has also said the provincial government has been developing "substantive rent control reform" amid calls to end a rule that sees annual rent increase caps only apply to residential buildings or units constructed before November 1991. Tenants in newer units have complained of dramatic spikes in rent.

CIBC economist Benjamin Tal says the measures are likely to cool the market over the next six months as many buyers wait to see the impact of the changes.

- A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.

"You can't go to a barbecue in the province without people talking about real estate and how everyone has a son or daughter who can't buy a home and wants to get into the market", Hudak said.

One major Toronto-area developer says "property scalping" is not a major phenomenon in the region. It typically involved a real estate agent reselling the same previously owned home multiple times before the closing date, driving up the price of the house, sometimes by hundreds of thousands of dollars.

However, Kavcic said the impact in Toronto could be more muted than it was in Vancouver, as the tax is not coming as a surprise and there are more exemptions. "Things have gotten insane", she said. "But for those who have the money to invest and see the high growth potential in Toronto, which is repeatedly voted as the best city to live in, I don't think the 15 percent will be enough of a deterrent".

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