Ontario imposes tax on overseas buyers to rein in Toronto housing prices
Levy applies to non-Canadian citizens, non-permanent residents and non-Canadian corporations buying residential properties
Ontario announced a rash of measures including a tax on foreign buyers and expanded rent control as part of a plan to temper escalating home prices in Toronto.
The 15 per cent levy would apply to non-Canadian citizens, non-permanent residents and non-Canadian corporations buying residential properties containing one to six units in the greater Toronto area, the provincial government said in a statement on Thursday. Rent control will be imposed on buildings constructed after 1991, which limits annual increases.
Ontario Premier Kathleen Wynne’s administration will also take steps to boost supply: the Ontario Fair Housing Plan includes 12 measures, such as a targeted C$125 million (US$93 million) five-year programme to encourage construction of new rental apartment buildings by rebating a portion of development charges.
“In some ways, we have to realise that this is a good problem to have,” Wynne said. The price rises reflected confidence in Ontario’s economy but when young people could not afford homes, “we know we have a problem and we know we have to act”, she added.
The move came two days after the province’s finance minister Charles Sousa said the government recognised that “now” was the time to address the issue.
Toronto’s surging real estate market has triggered debate over whether non-Canadian speculators are bidding up homes and fuelling unsustainable record price gains, or if a lack of housing supply and inadequate urban planning is more to blame.
The speculation tax, which is aimed to take effect immediately, will not apply to refugees or immigrant nominees.
Ontario’s government will also work with municipalities to identify provincially owned surplus land that could be used for affordable and rental housing development.
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 almost 30 per cent in the past 12 months. Bank of Canada governor Stephen Poloz said last week that there was no justification for such gains and warned of a price correction.
“[People] should be able to rent or enter the real estate market without making great sacrifices or taking on a huge amount of risk,” Wynne said. “At the same time, we recognise the need to protect the significant investment homeowners have made. This plan balances those needs to stabilise the market and prevent a sharp correction that would be harmful to everyone.”