It’s no secret that the 2 housing markets most coveted by foreign investors outside of Canada are Toronto and Vancouver. That will have nothing to do with the fact these are nice places to live with plenty of job opportunities. Nice and all, but these investors want to buy here exclusively because the demand outstripping supply reality is so pronounced in these two cities that home prices continue to go up meteorically. Of course that means significant gains on the investment, but the problem is it takes housing stock away from families who are struggling to afford a home.
And furthermore, a home that they would actually live in and in many cases raise children. Governments have a responsibility to cater to the interests of the constituents who vote them into office, and that is why both Vancouver and Toronto have a speculation tax that is attached to homes that are purchased as investments by someone who isn’t a Canadian. It’s an honourable move, although if we are going to be honest there are plenty of ways around it if people know what to do.
But that’s not the point here; these speculation taxes are a good thing and are needed. There’s no debating that, and even the most ruthless realtor will probably agree that a house that sold for $600K 5 years ago shouldn’t be going for quite a ways over $1M in such a short period of time. Ambition is a good thing, but not when it comes at the expense of others too decidedly.
On the topic though, real estate IS as competitive a business as there is and new realtors may struggle to drum up new clientele. Enter our online real estate lead generation system here at Real Estate Leads. It is proven effective and highly recommended. Back to topic though, what can we know for more about why Ontario is joining BC in increasing their speculation tax.
Up to 20%
The Ontario government introduced its NRST (Non-Resident Speculation Tax) 5 years ago in an effort to slow Southern Ontario’s rapidly growing housing market. As the market has continued upwards even faster in recent years, it’s become clear the NRST isn’t the deterrent policy makers had hoped it would be. So now it has gone up an additional 5%.
It is also province wide now. Up until 4 days ago the NRST was applied to only homes purchased in the Golden Horseshoe region, and by buyers – either individuals or corporations – who were not Canadian citizens or permanent residents. Plus the 15% was previously added on top of the purchase of a property. With the new changes that rate is increasing to 20% and will apply to homes sold anywhere in Ontario. According to the Provincial Government, the aim is to ‘strengthen efforts to deter non-resident investors from speculating in Ontario’s housing market, and in doing so making home ownership more realistic for Ontario residents who live and work in this Province.’
The government there has also managed to close loopholes in the tax that previously allowed for tax avoidance with some purchases. Foreign speculation has been highlighted as a primary factor driving prices up in Ontario, but we need to be clear that it is not the only primary factor.
Vacancy Tax Coming Too
Toronto is also following Vancouver’s lead in having both speculation AND vacancy taxes, and they’ve said they will be adding a home vacancy tax to also add funds to building affordable housing across the Province. Ottawa has said that they will do the same thing
In the press release, the province also indicates that they are working with municipalities to instate a vacant home tax as part of a plan in progress to ease affordability issues for Ontario home buyers. A vacancy tax has already been put in place in the City of Toronto and the City of Ottawa is in the process of preparing a similar tax.
In the coming months we should likely expect further measures coming from both provincial and federal authorities in an attempt to counter out-of-control price growth and supply deficiencies. While it is true the current Liberal performers did make it a campaign promise to ban all new foreign ownership for up to two years, they backtracked on that right quick in the face of pushback from many interest groups.
What we can all agree on is that addressing the housing supply crisis needs a long-term strategy featuring similarly long-term commitment and coordination with our partners and between all levels of government. A speculation and vacancy tax may in Ontario isn’t appealing in a basic sense for anyone who has worked hard to own a home, but it is now necessary in the light of years of Government indifference to foreign money – some of it being laundered – being allowed to buy Canadian real estate.
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