The Toronto Real Estate Board (TREB) is strongly against imposing a provincial tax on foreign buyers that would be in addition to existing provincial taxes on home buyers, including the land transfer tax that is already in effect. The TREB says an additional foreign buyer tax will not go far in addressing the real issue plaguing the GTA housing market: a supply shortage which is at more than a 15-year low.
The consideration of this tax follows a statement made last year by the Ontario Finance Minister stating Ontario would not be following the lead of British Columbia, which imposed a 15 per cent land transfer tax surcharge on foreign buyers in July 2016.
“When the idea of introducing a foreign buyer tax in Ontario surfaced last year, TREB cautioned it would be a knee-jerk reaction before knowing whether a problem existed. There was little in the way of reliable data on the issue,” said Larry Cerqua, TREB president, in a press release. “To better understand the foreign buyer issue, TREB commissioned an Ipsos survey on foreign buying activity in the GTA, the results of which show that concerns about the effect of foreign buyers on the GTA market are widely overblown.”
The survey, which was conducted in fall 2016, found that only about 4.9 per cent of GTA home sale transactions, in which TREB realtor members acted on behalf of a buyer, involved a foreign purchaser. In addition, 80 per cent of foreign buyers purchased a home as a residence, a home for another family member, or as an investment to rent out to a tenant.
“The fact that most foreign buyers are looking to purchase a home for their family, for personal use, or to provide a tight rental market with much needed supply is something to be encouraged, as these actions are essential to Ontario’s economic success,” added Cerqua. “We can’t forget that immigration is the key driver of population growth in the GTA and, therefore, a key driver of economic growth as well. Imposing a tax on foreign buyers will not have the desired effect of cooling the housing market and could create adverse effects on the national, provincial and GTA economies. It will do little to correct the real issue impacting housing affordability, which is the lack of available housing supply.”
Demand for ownership housing has increased over the past year, partly due to a shortage of listings. New listings in February 2017 were down 12.5 per cent year-over-year. In addition, TREB’s average months of inventory trend for February was one month, while in some GTA neighbourhoods, inventory only stood at a few weeks.
“We can’t lose sight of the fact that we have experienced a persistent decline in the inventory of homes available for sale in the GTA,” said Jason Mercer, TREB’s director of market analysis. “This issue has been acknowledged by provincial and local governments in Ontario, but now policy action is required. Demand-focused policy changes will not provide long-term solutions for an affordable housing market.”
“The provincial government should work with municipalities and related industry stakeholders to look at ways in which the supply of housing could be increased, including potentially revisiting land use designations in built-up areas to allow for a broader array of home types to be built, streamlining the development approvals process, streamlining the permit process, and examining ways to incentivize land owners to develop,” said Cerqua.