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: https://news.ontario.ca/opo/en/2017/04/making-housing-more-affordable.html.
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: http://business.financialpost.com/personal-finance/mortgages-real-estate/yep-still-going-up-canada-new-housing-prices-rise-on-vancouver-toronto-strength.
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