15th September 2016
Some of Ontario’s greatest economic minds have found themselves in a debate over the rising housing costs in and around Toronto. Some economic experts came out in favor of a 15% foreign buyer’s tax similar to the one in British Columbia. But those in the real estate industry warn moving ahead with such a tax without first understanding the possible negative economic effects could be harmful.
The heads of two of Toronto’s most influential real estate bodies have each submitted written objections to increases in Ontario’s taxation of foreigners buying property in the Greater Toronto Area (GTA). The leaders of the Toronto Real Estate Board (TREB) and the Ontario Real Estate Association (OREA) both wrote letters to the Ontario Finance Minister Charles Sousa and Toronto’s Mayor John Tory asking for more time to analyze and understand the effects the tax could potentially have on the economy if implemented too hastily. These groups and some others have called implementing the tax at this point ‘premature.’
On the other side of the coin, economists and politicians have said that the province’s leaders will have limited options other than implanting the foreigner buyer tax. These experts said that the Great Toronto Area’s (GTA) high land prices are caused by laissez-faire land supply policies and that a tax is one of the only ways to level the playing field. A 15% tax on purchases made by foreigners or non-residents of residential property could quickly achieve the stability needed in the market.
Ontario Finance Minister Charles Sousa has stated that there are no plans to implement a foreign buyer’s tax as of now. In addition, he said that both the Toronto and British Columbia housing markets will be monitored closely in the future to see how effective the tax works in British Columbia and if it could work in Ontario too.
Since British Columbia introduced its 15% tax on foreigner’s purchasing land in and around Vancouver over the summer, it appears to have slowed down housing activity significantly. According to the Real Estate Board of Vancouver, house sales have dropped more than 25% in August 2016 compared with a year earlier. However, Vancouver’s housing prices rose with the benchmark prices of residential properties increasing 31.4% from last year.
The assumption many have made after the tax arrived in Vancouver was that foreign money aimed at real estate would land elsewhere, such as Toronto, which saw a considerable rise in prices in the tax’s wake. Some real estate experts believe Toronto’s luxury market will also see a boon in response to British Columbia’s foreigner buyer’s tax.