Taxing Foreign Home Buyers In Toronto
By far the biggest real estate headline this summer was the implementation of a 15% foreign home buyer tax in the Metro Vancouver area. This tax was designed to reduce the amount of foreign money in real estate, softening the purchase price for the local market who in recent years have been priced out by the foreign home buyer.
There is speculation that Ontario, particularly in Toronto, may implement a similar tax in the near future to curb foreign ownership. As a Toronto Realtor, I believe that such a tax needs to be addressed with caution and strategically implemented to minimize the negative impact it may have on our market.
I am asked all the time if Vancouver’s foreign buyer tax will have an impact on Toronto’s real estate market. The answer is yes. Many overseas buyers will now choose to purchase in Toronto. Our real estate has always been reasonable compared to Vancouver, but at a minimum the Toronto market is now 15% less expensive. Over the course of the last 10 years property value in Toronto has risen steadily and a good profit can be made based on appreciation. All these factors make Toronto even more ripe for more foreign investment.
It is true that although prices have remained flat in Vancouver, the number of sales have declined by close to 30%. Stories of walk away buyers have come forward. By far this summer has been the busiest I can remember in my career. TREB has just posted a 23% increase in transactions in August. It will be interesting to watch over the next few months to see if Vancouver’s decline becomes Toronto’s lift.
In the past I have discussed the foreign home buyer and the lack of statistical information relating to this label. Who is a foreign home buyer? The Toronto market differs slightly from the Vancouver market. Many so called foreign home buyers in Toronto do come to live here or will rent out their investment properties to the local market. Where in the Vancouver area there is a high tendency for foreign owned properties remaining vacant. Instead of an across the board tax, looking into the possibility of taxing vacant foreign owned properties is a possibility.
Finally, the big question- Is Vancouver’s tax putting Toronto at risk? We are in a very heated market. The foreign buyer is already a factor here. For current sellers this could be a bonus. For local buyers this could push the concept of home ownership further away. If even more foreign owners come to Toronto within the next year and Ontario/Toronto decides to implement a similar tax, our property values could be at risk. However, smart planning and timely implementation can minimize this risk.
I would love to see the local labour market be able to afford to own property in the city in which they work. This is an issue of foreign money and local affordability. I do feel that tax of some sort will be down the road for Toronto. For the stability of the Toronto housing market, I am thankful we will be able to learn from Vancouver and base our course of action accordingly.