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A new tax set to take effect August 2nd in Metro Vancouver has the potential to stoke the flames of a major housing market thousands of kilometres away, some experts say.
Next month, foreign nationals and foreign corporations will be charged a 15 per cent property transfer tax on residential real estate purchases in Metro Vancouver, and this could drive Toronto home prices higher as these buyers turn to markets without such a levy, a new TD Bank report suggests.
“With any tax change, there may be some unintended consequences. For one, the move may shift foreign attention to other markets in BC, such as Victoria, or elsewhere in Canada,” write Michael Dolega and Diana Petramala, two economists at the bank, in the report.
Douglas Porter, BMO’s Chief Economist, says even a conservative estimate suggests it could mean revenue “well into the hundreds of millions” for the province, as BuzzBuzzNews reported earlier this week. TD points out the new tax will net the BC government $300,000 for a $2-million home sale.
“Even prior to the new policy announcement, we believed that foreign investors had already begun to gravitate to the more affordable Toronto market,” the TD economists say. “As such, prices in Toronto could see some significant upside pressure in the coming months as foreigners look to new markets,” they add.
While data on foreign ownership in Ontario is far from conclusive, Canada Mortgage and Housing Corporation says foreign residents own 10.1 per cent of condo units completed in Toronto Centre last year.
This June, the average sale price for a detached home in the Greater Toronto Area was $979,445, up 19.9 per cent from a year earlier, according to the Toronto Real Estate Board. Noting this increase, BMO’s Porter suggested Ontario should mull a comparable tax.
“The Ontario government should take a long look at a similar move. Any additional revenue would be a bonus for the debt-heavy province,” he writes in a research note.