Ontario, Canada brings in foreign housing tax to cool market

  • Ontario, Canada brings in foreign housing tax to cool market

Ontario, Canada brings in foreign housing tax to cool market

Canada's Ontario province announced new rent controls and a 15 per cent tax on home purchases by non-resident foreigners on Thursday to try to cool a searing hot Toronto-area real estate market.

Before imposing any new measures on real estate agents, Ontario government said, it will review the regulations governing the industry, including the body representing agents (the Ontario Real Estate Association) and the provincial regulator (The Real Estate Council of Ontario), CBCNews reports said.

The government doesn't keep statistics on the number of foreign buyers.

"I have three millennials at home, adults in their 20s".

"When young people can't afford their own apartment or can't imagine ever owning their own home, we know we have a problem", she said.

Toronto prices rose 33 percent in March from a year earlier and the average price of a detached home topped C$1.2 million ($903,000) last month.

The issue has become a headache for the province's Liberal government, which is trailing the Progressive Conservatives in polls ahead of an election in June next year, and lawmakers face a hard balancing act to find policies that will stabilize prices without crashing the market. He has warned as far back as the 2012 annual meeting that Canada's housing prices could be too high.

"Nobody wants to crash the market". Rather, he says, they serve another objective for a premier facing low approval numbers.

Ontario is also expending rent control, which now only applies to units built before November 1991.

"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. Asian investment in Toronto reportedly picked after Vancouver introduced its foreign buyer tax last summer.

As well, rent controls limiting increases on all buildings to the rate of inflation - as long as it is 2.5 per cent or lower - will be introduced.

"They're politically popular for the premier", he told reporters.

The province will also implement a tax on vacant homes in Toronto as part of measures to address a lack of supply of affordable homes, the province's finance minister Charles Sousa said. "There wasn't one single thing that we could do that would resolve the issues that we're confronting".

"We expect the measures to slow down activity in Toronto's housing market in the near term, not only due to their direct impact but also due to the impact of the uncertainty regarding their ultimate impact on potential buyers", he said.

Tal said he suspects that over the next few years, builders who were planning to construct rental buildings will opt for condos instead or cancel the developments altogether, a move that would reduce the supply of rental units.