
Changes in speculation tax unlikely to quell Ontario housing market, experts say
CBC
Real estate experts say Ontario's decision to increase and expand its foreign buyers tax won't do much to cool the province's hot real estate market.
Moving the non-resident speculation tax to 20 per cent from 15 per cent and applying it beyond the Greater Golden Horseshoe is the centrepiece of the More Homes for Everyone Act, which the province announced Wednesday.
The changes to the tax targeting non-resident homebuyers were coupled with the closure of a loophole that gave rebates to foreign students completing full-time studies for at least two years after a home purchase and foreign nationals who continuously worked full-time in Ontario for a year after buying.
The bill will also commit the province to working with municipalities on addressing speculation, dedicate $19 million over three years to reducing backlogs at the Ontario Land Tribunal and Landlord and Tenant Board and accelerate planning processes for cities.
But don't expect the cornerstone — the increased non-resident speculation tax that came into effect Wednesday — to send housing prices plummeting or quell the bidding wars that have become the norm in the market, experts say.
"Everyone in the industry, myself included, are well aware that this isn't actually going to affect the market," said Michelle Gilbert, a Toronto broker with Sage Real Estate Ltd.
Gilbert says Statistics Canada data showed non-residents owned only about 3.4 per cent of all residential properties in Toronto five years ago, so the measure affects a small slice of buyers.
Foreign buyers may have initially been deterred from buying properties in the region when the tax was initially implemented in 2017, but their attitudes have since shifted, she said.
"Foreign investors quickly realized even with a dip our market is still a safe haven for their money and they already look at that tax as just the cost of doing business," she said.
"So adding this additional five per cent, I don't foresee it affecting the amount of foreign buyers that do invest in, let's say. the Greater Toronto Area."
While BMO Capital Markets chief economist Douglas Porter said he'll keep an open mind on the impacts of the tax hike, right now he's "not convinced it's going to have a big effect."
He believes non-resident investors were a big source of the heat Toronto and Vancouver's market saw in 2016 and 2017, around the time foreign buyer taxes were implemented in both provinces.
Policy-makers had a "tremendous under-appreciation" for how these investors' were fuelling heated conditions, he said.
However, he believes the dominant force in Ontario's current market is intense inflationary pressures, which also pushed up prices in rural and suburban markets over the last two years.