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Ontario Should Tax Foreign Purchases of Real Estate

TheKingEast

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If foreign ownership has such a small impact on real estate prices, why have home prices in B.C. substantively decreased since the implementation of the foreign buyers tax?

http://www.theglobeandmail.com/real-estate/vancouver/vancouver-home-sales-drop-further-as-market-continues-to-soften/article33878876/

I think there's some confusion about what is being proposed. This isn't a tax on immigrants. We're talking about imposing a %15 tax on buyers who are not Canadian citizens. They are living in other countries and buying Canadian property. Middle class Canadians cannot compete with wealthy foreign investors who have no intention of living in the homes they are buying, but can turn a profit flipping them in a market seeing %20 year over year price increases. Failure to impose such a tax is a failure of governance and makes housing less affordable for Canadians.
Actually, prices were on the way down before the tax. It's silly to take what's happening in Vancouver and apply it here. This is an issue with many different factors and in some ways Toronto is similar to Vancouver and other ways it isn't.

That tax will not make housing affordable in Toronto. It will not make the transit problem go away, nor will it improve the lack of affordable rental housing in the city. Won't even address the lack of supply either.

There's only so much intervention the market can tage before it crashes. Just don't complain when it happens. That's a general comment.
 

Euphoria

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Of course the Toronto context is different from Vancouver's. Toronto's population is growing at a faster rate, and while we didn't have the same level of real estate investment from Pacific Rim countries as Vancouver has had, Toronto is a magnet for foreign investment internationally. Now that B.C. is pricier for off shore real estate investors, it's foolish not to think at least some of that investment isn't being redirected to Toronto. Such a tax would help shore up provincial coffers and cool down home prices more moderately than an interest rate hike. It comes down to this: Do you want a controlled shrink or a bursting of the housing bubble? These price gains are unsustainable.
 

Edward Skira

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News Release

New Data Shows Decrease in Non-Resident Home Purchases
September 14, 2017

Non-Resident Speculation Tax Helping Address Unsustainable Demand
Ontario's non-resident speculation tax (NRST) is helping to address unsustainable demand in the Greater Golden Horseshoe while ensuring Ontario continues to be a place that welcomes all new residents, as new data shows that home purchases by buyers who are not citizens or permanent residents of Canada have decreased.

Newly released data from provincially collected tax information shows that individuals who are not citizens or permanent residents of Canada, or foreign corporations, accounted for 3.2 per cent of home purchases across the Greater Golden Horseshoe Region, down from 4.7 per cent since the launch of Ontario's Fair Housing Plan this spring. In Toronto, 5.6 per cent of transactions were made by foreign buyers, down from 7.2 per cent.

Individuals who are not citizens or permanent residents of Canada, or foreign corporations, may be subject to the NRST.

Ontario's Fair Housing Plan introduced 16 comprehensive measures to make housing more affordable for homebuyers and renters, while bringing stability to the real estate market and protecting the investment of homeowners.

Making housing more affordable is part of our plan to create jobs, grow our economy and help people in their everyday lives.


QUICK FACTS
  • Data collected through Ontario’s land transfer tax system shows that foreign transactions (transactions that involved at least one foreign entity) in the GGH represented 3.2 per cent between May 27, 2017 and August 18, 2017, compared to 4.7 per cent between April 24, 2017 and May 26, 2017, a drop of 1.5 percentage points.
  • Approximately 3.2 per cent of 66,434 transactions in the GGH between May 27, 2017 and August 18, 2017 involved at least one foreign entity, compared to approximately 2.6 per cent of 101,698 transactions over the same time period in Ontario overall.
  • As of April 24, 2017, the Province began collecting enhanced information to better understand trends in Ontario’s local housing markets. This additional requirement applies to anyone who purchases or acquires land containing up to six single family residences or agricultural land.
  • As per the Toronto Real Estate Board, the average selling price for all home types combined was $732,292 in August 2017 – up by three per cent compared to August 2016.
  • As per the Canadian Real Estate Association, Ontario home resales declined five per cent in July from the previous month while average prices rose 0.5 per cent.
 

steveintoronto

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I think the supply side of the equation deserves consideration as well, zoning and land use bylaws need to change for developers to best maximize residential stock in metropolitan areas.
Indeed. I happen to think that the balance of forces is not just a bit more complex than some would like to think, but it's being *played* by those who feel wronged by the impositions of control.

Whatever the right and wrongs...*sanity* has returned somewhat to at least the Toronto Housing Market. I know two couples looking to buy right now, and it's such a relief to see at least one person in the two couples advising caution, rather than desperation of beating the clock. Having some time to think a decision of this magnitude through is not only necessary on a personal level, it's necessary for a stable market and economy.

@Edward Skira 's post noted, and I'm still digesting. Immediate impression? Thank God! Sustained impression? Time will tell.

To answer the supply problem, not just supply in aggregate, but *diversity* of supply is important. Up until now, developers haven't even had to try. Look at all the buyers who go burned. That's not good, for anyone. And now some are into negative equity too. That just shouldn't happen in a well regulated economy.
 
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