Ontario sets foreign housing tax to cool market

Left Toronto's 19 Mercer Street where the soon to be built Nobu Residences will be located. Right a rending of Nobu Residences Toronto

Premier Kathleen Wynne announced in Toronto one of the measures will be a 15 per cent Non-Resident Speculation Tax (NRST) on non-Canadian citizens, non-permanent residents and non-Canadian corporations buying residential properties containing one to six units in the GTHA. The area, which stretches from the Niagara Region to Peterborough, Ont., is home to about 9 million people and is one of North America's fastest growing regions. Once the legislation passes, the foreign tax would be effective retroactively to April 21.

The tax is not about targeting immigrants, Wynne said, and a rebate would be available to people who subsequently get citizenship or permanent resident status, as well as foreign nationals working in Ontario and worldwide students.

"Ultimately at the end of the day, you probably end up in a situation where the market absorbs the tax and keeps pushing higher", said BMO economist Robert Kavcic. As of Monday, however, homebuyers are required to give information about their residency and citizenship status and how they intend to use the property.

Home sales plunged and price growth stalled for months in Vancouver following the B.C. government's introduction of a 15 per cent tax on foreign buyers last August.

"It's incredible that so many people came forward and forced the government to do something about this", she told CBC News Thursday. "The new tax will slow down the market a bit, as it did in Vancouver". But a recent report from realtor Royal LePage suggests the Vancouver market may be starting to bounce back.

Home prices in the Toronto region rose 6.2 per cent in March, the biggest one-month gain on record, according to a benchmark price index by the Canadian Real Estate Association, and jumped nearly 30 per cent in the past 12 months. "They are only looking for a quick profit or a safe place to park their money", Wynne said. "They wonder how they are ever going to get their starter home", said Ontario Finance Minister Charles Sousa. "When young people can not afford their own apartment or can not imagine owning their own home, we know we have a problem. and we know we have to act".

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Ontario is also expending rent control, which now only applies to units built before November 1991. Under the new regime, rent increases will now be limited to 1.5-2.5 per cent annually - roughly the rate of inflation - for all rental units.

Average rents went up 11 per cent, while the vacancy rate fell to a 12-year low of 1.3 per cent.

This week, CBC's Here and Now interviewed 25-year-old Nicole Meredith, who has been forced to move after her rent jumped $425 per month after a new company purchased her building. I am pleased that the government will activate surplus provincial land like the West Don Lands to create new affordable housing, something I have been urging the Premier to do for some time.

He says the measures will also look at how to expedite housing supply, and he has appeared receptive to Toronto Mayor John Tory's talk of a vacant homes tax. "That's why we're bringing forward this package".

According to Murphy, the 16 measures do little to help renters or ease the supply-side pressure of the housing market.

She added that the province will review the rules surrounding real estate agents to ensure buyers are getting a fair shake in bidding wars.

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