In what is likely the most comprehensive survey of agent opinion on the matter, the results are in on whether or not the industry is in favour of a foreign sales tax in Toronto.
A total of 3,343 REP readers took part in our latest poll, in which we asked whether a Toronto foreign sales tax was a good idea.
Opinion was decidedly split.
Of those based in Toronto, 49% said it would a good idea compared to 51% disagreed.
Outside of Toronto, meanwhile, agents had a relatively similar split: 51% were in favour of a Toronto foreign buyer tax compared to 49% against.
A lot has changed since last summer’s bombshell announcement that Vancouver would start taxing foreign homebuyers an additional 15%. Vancouver’s real estate prices took a dive while Toronto’s skyrocketed.
And while there is no concrete proof that foreign money that would have been spent in Vancouver is making its way further east, anecdotal evidence certainly supports that hypothesis.
The news of Vancouver's tax hit the mortgage broker industry like a sledgehammer last summer, but mortgage brokers couldn't seem to come to a consensus on whether it was a good or bad thing. A poll on REP’s sister site, MortgageBrokerNews.ca found that 54% of brokers supported the tax, compared to 33% who did not. An additional 13% were undecided.
Now, it seems, the debate could soon be reignited in Toronto.
“A year ago I was thinking, ‘Let market forces prevail,’” Finance Minister Charles Sousa recently said when asked about the potential tax. “But now I’m concerned about … the ability of people to enter the marketplace. [There are] bidding wars everywhere you go, it appears, and I’m sensitive to that.”
For its part, however, the housing industry in Ontario is against the tax.
"Home affordability needs to be addressed before millennials are completely priced out of the market,” said Ontario Real Estate Association CEO Tim Hudak. “That is why Ontario Realtors have called for the creation of an Affordable Homeownership Task Force. We need real estate experts to come together to hammer out a plan for making homeownership more attainable for first-time buyers and young families.
“The main culprit behind rapidly rising house prices is the GTA’s unbalanced market – housing supply cannot meet demand – not foreign buyers,” Hudak continued. “A foreign buyer tax would only penalize the international MBA student who will one day start her own business in our province, or the surgeon aspiring to work at Sick Kids. Before we pin a tax on foreigners, we need to address the elephant in the room, and that’s the lack of housing supply.”
That opinion was echoed by the Toronto Real Estate Board.
"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,” said TREB president Larry Cerqua. “There was little in the way of reliable data on the issue. 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."
That survey found that only 4.9% of transactions in the GTA are attributed to foreign buyers, and that 80% of those buyers are purchasing a primary residence.
"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,” Cerqua said. “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.”
Others in the industry have laid the blame on the government's latest regulations.
“The bigger concern has to do with tightened lending rules, which make it more expensive for buyers to acquire homes,” said Sergio Custodio, co-leader of the national real estate law practice at Fasken Martineau.
However, there's no denying that Vancouver’s tax appears to be effectively addressing the city's affordability crisis. The average home was selling for more than $1 million in June of last year, the month prior to the announcement of the tax. By January 2017, however, Vancouver’s prices cooled to an average of $878,242.
Toronto’s real estate prices, meanwhile, experienced the opposite. The average GTA home cost $709,825 last July; in January 2017, it was $770,445. GTA figures include totals from Brampton, Durham, Mississauga, Orangeville, and York Region – all of which, save York Region – bring Toronto’s average price down.
While many industry players oppose a foreign tax in Toronto, the prospect has gained some proponents.
“The more Toronto houses soar in value, the more vulnerable all these parties are to an ugly correction,” personal finance columnist Rob Carrick wrote in a recent column for the Globe and Mail. “A foreign buyer tax has helped to settle a frantic Vancouver market, and there’s no reason to think it wouldn’t help slow Toronto as well. We want to pump the brakes on housing through a series of measures, if required. Bringing the market to a screaming halt would be just as bad as letting it soar and then crash.”
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