As many of you may have heard, Ontario Finance Minister, Charles Sousa, mentioned he will foster conversation around a “Foreign Buyer’s Tax”.
While we understand that the market is appreciating too rapidly for it’s own good, this tax might not be the right tool to temper the heat. Supply is the main culprit causing this rapid appreciation; compared to last year, active inventory is down 50.5%! It’s in everyone’s best interest that prices level out, and inventory becomes more available.
The Toronto Real Estate Board and LPSOS state that foreign buyers account for only 5% of the buyers in this market. Further, a similar study with Juwai (Sotheby’s Media Partner in China) indicate that the main reason behind their investment is to use the home as a base for someone pursuing Canadian education, or for personal use. Brad Henderson, CEO of Sotheby’s International Realty Canada, said foreign buyers are a tiny proportion of the Toronto market and any move by Mr. Sousa to tax them will not fix the more pressing problems.
“Our view is that it’s the wrong policy approach because the presumption is that the foreign buyer is the one driving prices up in Toronto and that’s not the case – no facts support that that’s the case,” Mr. Henderson said.
Every day, we work with families that come to Canada for a better life. They pursue fulfilling careers in key industries, and strive to “make it” in the new country they call home. These families are an important component in our workforce, and are vital to our continued GDP growth. With a Foreign Buyers’ Tax in place, we are telling these families that we are putting up walls that prevent their easy integration into our communities.
Canada is a world-class city, and the most stable country in the G8. Our lack of inventory is derived from us doing things right, but at the same time, our market needs to relieve inventory for the influx of immigrants.
With a lack of supply and intense development pressures, we need to explore alternative housing space. While it’s important to preserve certain neighbourhoods, some neighbourhoods have the space and structure to support higher density housing. The Toronto University allocated a portion of their campus to build 50 laneway-style houses, which will help municipalities and developers consider alternative housing stock.
If you know anyone looking to downsize, inventory is low and homes are selling at record prices. We can’t predict what housing legislation might come into effect, and what the repercussions of that legislation might be. If you know anyone who is reliant on their home’s equity to retire it might worth a discussion.