Ontario, Canada brings in foreign housing tax to cool market

Homes under construction in a new subdivision THE CANADIAN PRESS  Jeff McIntosh

Some housing measures promised by the province Thursday were encouraging to market watchers in Hamilton, where prices have been rising by double digits for years.

It matches the 15 percent tax the Pacific coast city of Vancouver has implemented. The initial signs were that Toronto would not to go down that road.

Premier Kathleen Wynne announced the measures Thursday morning.

Tory said he has committed to streamlining and speeding up building approvals, in particular for new affordable rental housing and he is also looking at a vacant homes tax.

Once legislation passes, the non-resident speculation tax would be effective retroactively to April 21.

A 15 per cent tax on home purchases by non-resident foreigners.

Ontario's Fair Housing Plan would also expand rent control to all private rental units, including those built after 1991, strengthening protections for tenants against sudden, dramatic rent increases. The decline of purpose-built rental housing-which has recently witnessed a resurgence due to increased demand-has been attributed by some to previous rent control measures, though the extent to which rent controls have impacted new construction starts is disputed. Over the past ten years, the annual rent increase guideline has averaged two per cent.

Toronto Mayor John Tory, who met with Sousa and federal Finance Minister Bill Morneau on Tuesday to discuss housing affordability, welcomed an expansion of rent controls.

Before imposing any new measures on real estate agents, Ontario government said, it will review the regulations governing the industry, including the body representing agents (the Ontario Real Estate Association) and the provincial regulator (The Real Estate Council of Ontario), CBCNews reports said. Called the "Non-Resident Speculation Tax", it is similar to the tax imposed in Metro Vancouver a year ago, but with a rebate for homebuyers who become resident within a limited time period after the purchase.

Wynne said the measures were created to help people afford to rent or buy a home, brushing off a suggestion that the move was more about boosting her approval rating, which has recently plunged to just over 10 per cent, according to polls.

- A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.

"While we support the government's interest in ensuring viable rental options for Ontarians, well intentioned yet dramatic changes to rental policies meant to improve options for renters will have unintended consequences, resulting in a stagnant rental industry, declining rental assets, and less choice for today's tenants". The real estate market heavily influences consumer spending-when markets boom, homeowners feel wealthier, and spend more money.

"A lot of local buyers will sit on the sidelines for a while to watch and see what happens, and then that pent-up demand will re-enter the market down the road once the fear and the unknown has passed", said Blair Mackey, a sales representative with Royal LePage Real Estate Services.

The plan also includes establishing timelines for elevator fix so that they aren't broken so often in condos and apartments.

Housing experts believe it could also free up more rental homes, say politicians and housing experts.

"I look at housing as a place to live for people in this city". "At the same time, we know that those who own their homes are concerned that they maintain the value of those homes". "They'll look after themselves". An average house in the Greater Toronto Area is more than $1 million; countrywide, it's more than $500,000.

"Foreign buyers are quicker to buy this type of investment, so new development sales are going to take a little bit longer now".

If prices continue to skyrocket in the absence of higher household incomes, the chance of a housing crash rises, Mercer told the Financial Post.

Sydney, Singapore and Hong Kong have also introduced foreign buyers taxes.

We'll wait for the details but from the sounds of things, indications are that they're taking a sledge hammer to it.

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

With its 16-point plan, the government is "hoping they have it right, but they don't really know", says Moscovitch.

"Yet, the question is, will Toronto grow at the same pace we're now experiencing?" But the region was up 4.1 per cent on a month-over-month basis. "At their current, severely low levels, the region's inventory has the potential to greatly exaggerate any movement made in the market".

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