Wednesday, 26 July, 2017

Ontario, Canada brings in foreign housing tax to cool market

Ontario Finance Minister Charles Sousa discusses the federal budget at a news conference in Toronto on Wednesday Housing market becomes Ontario's next big issue
Melinda Barton | 21 April, 2017, 18:18

"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. "I think they're already having an effect".

Experts say measures introduced by the Ontario government to cool the red-hot housing market are likely to leave a lot of the buyers on the sidelines as they await to see the impact of the changes.

The tax is not about targeting immigrants, Wynne said, and a rebate would be available to people who subsequently get citizenship or permanent resident status, as well as foreign nationals working in Ontario and worldwide students. House prices in surrounding communities have also surged, as buyers give up on the Toronto market and head further out to find real estate within their budget.

The cost of a detached home in Toronto roared to a new record high of nearly $1.6 million in March, a 33 per cent climb over prices previous year, according to the Toronto Real Estate Board (TREB).

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.

The latest sales data came ahead of a meeting between Mayor John Tory and the federal and Ontario finance ministers to discuss soaring home prices in the Greater Toronto Area, which have leapt by more than 30 per cent in the a year ago.

"That's also a national issue we took to Members of Parliament (on March 23, 2017) because the federal government is going to be working with the provinces on carbon pricing", he said.

Ontario also plans to allow municipalities, led by Toronto, to slap their own tax on vacant properties.

The number of houses sold in Vancouver has tapered off since a 15 per cent additional land transfer tax was introduced for foreign buyers in the British Columbia city last August.

The province will also expand rent control, which now only applies to units built before November 1991, after tenants in newer units complained of dramatic spikes in rent.

"The non-resident speculation tax has nothing to do with new Canadians and people who want to make Ontario their home".

"We saw a 50 per cent increase in professionally managed, purpose-built rental apartment units previous year in the Toronto area and there are 28,000 in the pipeline in the Toronto area", said Murphy, adding that 90 per cent of FRPO members who responded to a recent survey wanted to build apartments.

"This outreach to a subset of our membership shows not only a significant intention to create new, badly needed goal built rental housing developments in Ontario, but also the vulnerability of the projects should the current environment suddenly change without consultation or consideration", FRPO president and CEO Jim Murphy said. The company cut ties with 45 brokers in 2015 after finding falsified borrower income information, the same flaw that sunk many subprime lenders in the US during the housing crisis.

The building industry has warned that rent control will discourage the construction of new rental properties.

Premier Kathleen Wynne and Finance Minister Charles Sousa have been facing increasing pressure to tackle rental affordability, encourage more supply, crack down on speculative investment, and introduce polices to rein in prices in Canada's largest city.

Strengthen the Residential Tenancies Act, including a standard lease with multilingual information, tightening provisions for "landlord's own use" evictions, and ensuring adequate tenant compensation if evicted.

All indicators right now point to the Toronto market experiencing significant growth over the remainder of the year, says Mr Zigelstein.

Providing municipalities with the flexibility to use property tax tools to help unlock development opportunities.

Real estate agent Sabrina Ataullah-Jan said that Canadian properties are undervalued and that is why the Toronto area has an influx of foreign investment. Others, however, believe the figure was much higher.