Toronto foreign buyer tax questioned by realtors

CN Tower, Toronto, Canada
CN Tower, Toronto, Canada

Toronto’s recent decision to introduce a tax for foreign buyers has been questioned by realtors, as new research reveals that overseas investors are not to blame for the city’s housing bubble.

The tax was announced as part of a string of 16 new measures by Ontario lawmakers, which were announced primarily to combat the soaring property prices in the area. Indeed, the average sold price in April 2017 surged 24.5 per cent to an eye-watering $920,791, according to the Toronto Real Estate Board. While Toronto has been quick to follow the example set by Vancouver, where overseas buyers have helped to contribute to a shortage of supply, thereby pushing up values, new statistics in Ontario suggest that the tax may be based on incorrect information.

The Toronto Real Estate Board’s research shows that the number of property buyers with a mailing address outside of Canada is far lower than 1 per cent, with most of those based in the USA. According to the TREB, whose research is based on land registry data, foreign ownership accounted for only 2.6 per cent of the market in Q1 2017, just above the average 2.3 per cent share recorded between 2008 and 2017.

Almost 9 out of 10 foreign buyers purchased their property as a place to live, which also contradicts the presumption that speculative investment was a major driver of international investment.

John DiMichele, TREB’s Chief Executive Officer, commented: “It is not yet clear what impact the measures contained within the Ontario Government’s Fair Housing Plan have had on TREB’s market area or the broader Greater Golden Horseshoe.”

The realtors’ report did carry some good news for local buyers, though, with agents reporting an influx of 31.7 per cent more new listings in April, which should help to balance out supply and demand.

“Despite the recent uptick in new listings on TREB’s MLS System, we believe that we all have to be committed to a better understanding of issues affecting demand and supply dynamics in our marketplace. TREB will continue to collect and disseminate data on our marketplace and will continue to work with all levels of government as it relates to housing market policy,” added DiMichele.

“It was encouraging to see a very strong year-over-year increase in new listings. If new listings growth continues to outpace sales growth moving forward, we will start to see more balanced market conditions” commented Jason Mercer, TREB’s Director of Market Analysis. “It will likely take a number of months to unwind the substantial pent-up demand that has built over the past two years. Expect annual rates of price growth to remain well-above the rate of inflation as we move through the spring and summer months.”

TREB concluded that while it was pleased that all levels of government are making the state of the housing market a priority, public policy decisions “should be evidence-based and supported by empirical data”.

 

Toronto to introduce 15 per cent foreign buyer tax

21st April 2017

Toronto is set to follow in Vancouver’s footsteps with its own tax for foreign property buyers.

The Canadian city is one of the most active, and tightest, housing markets in the country. Sales activity in March was up 6.6 per cent across Canada, according to the Canadian Real Estate Association, with Greater Toronto Area leading sales increases. That increase offset a decline in the Greater Vancouver area, after the region introduced a tax last year to cool down its hot market and deter overseas speculative investment.

Now, as experts speculate whether Toronto will become the new foreign investors’ favourite (prices rose in the 30 per cent range year-on-year in Greater Toronto and Oakville Milton), the city has announced that it will introduce its own levy for non-resident investors.

Ontario Premier Kathleen Wynne announced the 15 per cent tax this week, alongside expanding rent control measures and a charge on vacant homes.

The new levy will apply to buyers active in the area from Niagara to Peterborough, if they are not citizens, permanent residents or companies registered in Canada. The tax, once officially introduced, will be retroactively applied to transactions from today, 21st April 2017.

Immigrants, however, will not be penalised by the tax, with a rebate available to anyone who subsequently acquires citizenship or permanent residency, as well as international students and foreign nationals working in Ontario.

“The non-resident speculation tax has nothing to do with new Canadians and people who want to make Ontario their home. With this tax, we are targeting people who aren’t looking for a place to raise a family — they’re looking only for a quick profit or a safe place to park their money,” said Wynne.

Toronto will also introduce rent controls, which currently only applies to units built before 1991. All private rental homes will fall under an annual rent increase guidline.

The measures form part of a package of 16 housing proposals, which will include a rebate for developers building homes for rental construction, and also a review of estate agency procedures and regulations.
 

Chinese property investors turn to Seattle and Toronto

13th December 2016

Chinese investors are turning to Seattle and Toronto in the months following the introduction of Vancouver’s foreign buyer tax.

We asked the question last month whether the tax would have a notable impact upon investment trends in Canada’s property market, and where investors might turn instead of Vancouver. According to Juwai.com, Seattle may be the answer, with enquiries on the Chinese portal more than doubling in November 2016.

Interest in Seattle rose 140 per cent year-on-year, 78 per cent in October, 93 per cent in September and 63 per cent in August. Vancouver, on the other hand, saw enquiries dip 80 per cent in August 2016 and 25 per cent in September.

Matthew Moore, President of the Americas for Juwai.com, comments: “One reason the November stat looks high is that November 2015 was just one of those months where the number of inquiries wasn’t particularly high. The secret is out. Seattle’s a great place to live. Even the Chinese know it. There is no question that the tax in Vancouver is displacing some buyers to Seattle. How long will it go on? That depends in large part on what happens north of the border. If Vancouver stabilizes or comes roaring back, you could see interest in Seattle decrease.”

Toronto also saw demand increase, with enquiries jumping 60 per cent in August and 80 per cent in September. On TheMoveChannel.com, Toronto became one of the Top 50 most searched-for locations in Q4 2016, Canada’s first city to be included in the portal’s quarterly Hotspots Index.

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