Published: Fri, April 21, 2017
Business | By Max Garcia

Ontario, Canada brings in foreign housing tax to cool market

Ontario's provincial government on Thursday introduced a 15 percent tax on property purchases by foreign buyers as part of 16 measures created to cool Toronto's red-hot housing market.

"Ultimately at the end of the day, you probably end up in a situation where the market absorbs the tax and keeps pushing higher", said BMO economist Robert Kavcic.

That is what I view as my responsibility, not to look after the investment needs of people who chose real estate as their investment target.

Ontario Finance Minister Charles Sousa signalled that he will unveil his housing plan before the provincial budget, set to be delivered on April 27.

Bank of Canada governor Stephen Poloz said last week that the current rate of price increases suggests demand is being driven more by real estate speculators and investors than homebuyers.

Sousa said he wants the federal government to close a "loophole" that allows so-called property scalpers to treat their profits as capital gains, which means only 50 per cent is taxable. However, Sousa hasn't said exactly how he'll make them pay more in tax.

"The realtors themselves have asked for a little more transparency and determination as to how operations are", he said.

"That's exactly what we've seen in Vancouver", said Tal.

Toronto is also likely to see a vacancy tax introduced to curb so-called absentee landlords, a measure backed by Mayor John Tory. Wynne said there is a problem when the market jumps 33 percent in a year.

- Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.

"The move forward with an approach to dealing with potential speculators we hope will have an impact on reducing the speculative nature of what's going on in the market", he said. "Maybe, but I didn't have that crystal ball and so we made a decision then and what we're trying to do now is make sure we bring in a robust enough package that we have some checks and balances within it".

"A strong housing market reflects Ontario's strong economy".

Vancouver's empty homes tax is one per cent of the value of the property and it applies to homes that aren't being used as a principal residence or aren't rented out for at least six months of the year.

The non-resident speculation tax will be imposed on buyers in the Greater Golden Horseshoe area - from the Niagara region to Peterborough - who are not citizens, permanent residents or Canadian corporations.

They'll also be required to say if the home is intended for their use, or if they intend to lease it out. "Because housing market balance varies by location, federal or provincial policy measures aimed at cooling demand in Toronto risk destabilizing housing markets elsewhere".

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