Wynne to slap 15 per cent tax on foreign real estate speculators

Ontario brings in foreign housing tax to cool Toronto market

Ontario Premier Kathleen Wynne on Thursday introduced Fair Housing Plan (FHP) to make housing more affordable for home buyers and help renters market, a recent news release said.

The tax, which is effective immediately, is aimed at preventing foreign investors from driving up real estate costs.

Ontario announced a rash of measures including a tax on foreign buyers and expanded rent control as part of a plan to temper escalating home prices in Toronto.

Modelled on British Columbia's "foreign buyers' tax" in Vancouver, the levy would apply to home purchasers in the so-called Greater Golden Horseshoe who are not citizens or permanent residents. Wynne maintained a similar tax wasn't the right fit for the province.

Simply increasing taxes on home ownership could lower the value of Toronto real estate, while doing nothing to increase the supply of homes, bringing with it the worst of both worlds. "At the same time, we recognise the need to protect the significant investment homeowners have made".

Currently, only rental units before November 1991 have been subject to rent control, which limits how much landlords can increase rent from year to year. The decline of purpose-built rental housing-which has recently witnessed a resurgence due to increased demand-has been attributed by some to previous rent control measures, though the extent to which rent controls have impacted new construction starts is disputed. There is very little data available on the number of vacant homes in the region, and speculation - which this tax would effectively try to curb - tends to account for a very small proportion of the market. "Frankly, it's a free market and market forces will prevail ultimately as we proceed forward", Sousa said.

The Ontario government introduced a package of 16 measures Thursday created to tame runaway home prices in Toronto and surrounding cities, and improve affordability for those hoping to own or rent property.

NDP MPP Peter Tabuns slammed the government failing to move faster to address the rent control loophole.

But he noted that the impact of policy changes is hard to predict, and there is a risk of fallout beyond the housing market in other pockets of the banks' consumer credit business that includes credit cards and auto loans.

Sousa discussed vacancy rates that are constraining supply at a meeting this week with the federal finance minister and Toronto Mayor John Tory, who has been talking about a vacant homes tax.

The provincial Liberal government's housing plan contains 16 measures in total.

The province will also work with municipalities and other partners to identify provincially owned surplus lands that could be used for affordable and rental housing development.

"A lot of local buyers will sit on the sidelines for a while to watch and see what happens, and then that pent-up demand will re-enter the market down the road once the fear and the unknown has passed", said Blair Mackey, a sales representative with Royal LePage Real Estate Services.

While this is a great policy for tenants in the short term it's not a great policy for our rental market as a whole because it will likely result in fewer rental units in the years ahead - and even higher rents.

Ontario Finance Minister Charles Sousa signalled that he will unveil his housing plan before the provincial budget, set to be delivered on April 27.

Compared with a year ago, actual sales in Canada, not seasonally adjusted, were up 6.6 per cent. Gains in the Greater Toronto Area led the way with a 17.0 per cent increase.

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