Archive for the 'Foreign Buyer Tax' Category

August 8, 2017

Non-resident home buyers have recently been hit with a foreign buyer tax in Ontario.

Everyone knows that housing prices have skyrocketed in the past few years in the Greater Golden Horseshoe area. Media pundits, economists, real estate professionals and your average armchair critic all have their theories about why prices have been climbing so high. In an effort to curb this market, the aforementioned tax has been introduced.

This isn’t exclusive to Ontario, or even Canada. Other jurisdictions have introduced non-resident measures as well:

  • British Columbia introduced a 15-percent foreign buyer tax in 2016 to help calm the Vancouver housing market.
  • Australia very recently doubled property taxes for foreign buyers who keep their homes unoccupied for more than six months of the year.
  • Switzerland restricts foreign investors from outside the European Union and limits the number of houses available to foreign buyers each year.

Ontario also thinks the solution to the problem is levying a tax on foreign real estate buyers. In their recently implemented Fair Housing Plan, the Ontario government introduced 16 new measures from rent control to land transaction regulations. You can read more about their 16-point plan here:

However, the point that is generating the most press is the controversial Non-Resident Speculation Tax. It’s an attempt to try and calm the rocketing housing market in and around Toronto by targeting foreign buyers and speculators. Commonly known as the Foreign Buyer Tax, it applies to:

  • transfers or acquisitions made by a foreign individual, foreign corporation or a taxable trustee
  • non-citizens or permanent residents, taxable trustees and foreign corporations
  • one hundred per cent of the value if any one of the purchasers is a foreign entity
  • properties with at least one and no more than six single-family residences

The Non-Resident Speculation Tax primarily targets the act of acquiring real estate while a non-resident of Ontario. The tax was generally welcomed by economists as a small step to control spiraling prices. Will the tax have any impact in Ontario? It’s too early to tell what impact, if any, the tax will have on housing prices in the GGH.

This measure is based on the assumption that foreign home buyers are the primary reason for the steady increase in hot market housing prices, but are they solely to blame? Could it be population growth? What about supply and demand? Whatever is driving the increase in prices, foreign buyer taxes seem to be having little impact on the housing market according to the Financial Post:

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Last year, Vancouver introduced a foreign buyer tax of 15% on non-residents of Canada who purchased real estate in the area. The tax was introduced as part of the legislation aimed at curbing the skyrocketing real estate prices in southern B.C. and to address low vacancy rates.

Around the same time that the tax was introduced, real estate prices in Vancouver started to decline. However, while the Globe and Mail reported that prices fell 31% in the 5 months following the tax, real estate sales prices actually began to decline in March of 2017 – 6 months before the new tax was implemented in August.

Sales volume: Metro Vancouver detached homes

Some real estate associations and media outlets have continued to predict that Vancouver housing prices will further drop in 2017 – but it remains to be seen if this will be a direct result of the new foreign buyer tax or not.

For several years now, Vancouver and Toronto have been the hottest real estate markets in the country and so the question of the hour is, will Toronto eventually introduce a similar tax to that introduced in Vancouver?

It’s an interesting question that has so far received no clear answer. Towards the end of 2016, the BNN reported that Ontario Premier Kathleen Wynne had made strong indications that Ontario would not be following B.C.’s lead with a tax on foreign homebuyers. However, at the beginning of 2017, CBC News reported that Toronto Counsellor Jim Karygiannis was in favour of a tax of 5% levied on foreign buyers.

Since then, we’ve heard more and more individuals share their thoughts on a foreign buyer tax. TREB has urged the Ontario government not to introduce one, while Finance Minister Charles Sousa said that he’s considering it as a possibility to cool Toronto’s red-hot housing market. A recent study done by Ryerson University’s City Building Institute also suggests that the curbing of foreign buying is necessary, but that it may not be enough.

How does the real estate community feel about this notion? Global News has reported that some Toronto real estate sales professionals believe that “a foreign buyer tax in the Greater Toronto Area (GTA) would be ‘misguided’ at a time of decaying affordability in the city”.


What’s your take? Would you support a foreign buyer tax in the GTA? What impact, if any, do you think it will have on GTA home prices? Join the conversation – tweet us @geowarehouse or post your thoughts on our Facebook page.

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